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TMI Blog1978 (7) TMI 117X X X X Extracts X X X X X X X X Extracts X X X X ..... beneficiaries of the trust created by her late husband and was also a trustee of the trust appointed by the testator. She had received her income as a beneficiary of the trust which has mainly agricultural income, in the same way as income distributed to all other beneficiaries. The ITO who had, for a number of years, been assessing the trust started assessing the individual beneficiaries in some other years but the contention on behalf of the assessee was that the amount assessed in the hands of the beneficiaries cannot include agricultural income but only income from sources other than agricultural. It was claimed that s. 165 of the IT Act, 1961 applies on the facts of the case. The ITO however, referred to cl. V of the Will of the decea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TO, whether s. 165 applies to the amount received by the assessee. A reading of the Will shows that the testator had appointed four executors and trustees viz. Phillip Wellinger Davis, (2) Merri Pain Davis, (3) Mrs. Thecla Edna Hewett, and (4) Mrs. Dorothy Constance Davis. Vide cl. III, the executors were directed to pay and discharge all the just debts, funeral and other testamentary expenses and cost of monument over the grave of the deceased as soon as conveniently may be after his demise. This was the only clear direction given to the executors. Although this very direction is repeated in cl. X, that direction is addressed to the trustees to pay and discharge all the just debts and funeral and testamentary expenses and cost of monument ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove, to be paid to his two sons and a daughter, to his two grand-sons and grand-daughter and grand-nephew in different shares. This was to administer the affairs of the estate till his wife, the assessee was living or she gets remarried. Thereafter, the estate was to be divided in the shares given in the Will. 5. The first question that arises is as to when the executors had completed their job and the trustees took over. According to Sanjeeva Row's Indian Succession Act, 3rd edition, page 644, the essential duties of executors are getting in the estate of the deceased, payment of funeral expenses and debts and the discharge of his legacies. In the instant case, the executors had specifically been directed by the testator to pay of his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tence of a debt or debts, or liabilities which are outstanding prevents the assent of the executors being inferred by his conduct. In my judgment, that is not so. We are of opinion accordingly that no ground has been shown disturbing the Commissioner's finding that Mr. Carlish's residuary estate was established at the end of 1938 and that as from then the bank ceased to be executor and became trustee." Applying this principle laid down by the Court of Appeal, it is conclusively established that much before the year of 1961-62, which is the first year of appeal before me, the administration of the estate had ended and the executors had become trustees. 6. I would like to stress the point that vide cl. V of the Will, the direction wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yment to the assessee has been made out of the income of the estate, which is held by the trustees, and the trustees have been assessed in some of the years and the income is mostly not subject to tax being agricultural income, I fail to under-stand how the assessee can be assessed again in respect of the same income which has come out of the trust income and which has already been brought to tax. This would result in double taxation of the same income which is not permissible under the law. 7. In the years in which the ITO decided to assess the beneficiaries directly, s.165 would apply because only part of the income of the trust is chargeable to tax since as already noticed above, major part of the income is from agriculture i.e. coffe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dom claimed exemption from tax in respect of his share as attributable to the income from tax-free securities. Held: as there was no appropriation of the trust funds amongst the beneficiaries, the claim for exemption failed. Under the Indian Act, the claim would be allowed, pro rate.)" The commentories on page 965 in Kanga Palkhivala's The Law and Practice of Income-tax, 7th edition to s. 165 is also to the same effect that this section indicates that when a part only of the trust income is chargeable under this Act, the beneficiaries' share of the income should be taken to be derived proportionately from the chargeable and non-chargeable trust income and should be assessed accordingly in the hands of the trustees. In my opinion, this ..... X X X X Extracts X X X X X X X X Extracts X X X X
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