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Raghunathdas Kakani Vs. Addl. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMadhya Pradesh High Court
Decided On
Case NumberMiscellaneous Civil Case No. 249 of 1976
Judge
Reported in[1980]122ITR952(MP)
ActsIncome Tax Act, 1961 - Sections 159, 168 and 168(3)
AppellantRaghunathdas Kakani
RespondentAddl. Commissioner of Income-tax
Appellant AdvocateA.K. Chitaley, Adv.
Respondent AdvocateA.M. Mathur, Adv.
Cases ReferredK. Kunhi Mohammad Hajee v. State of Kerala
Excerpt:
- - 6. section 159 of the act is as follows :159. (1) where a person dies, his legal representative shall be liable to pay any sum which the deceased would have been liable to pay if he had not died, in the like manner and to the same extent as the deceased. ..7. this section provides that where a person dies his legal representative shall be liable to pay any sum which the deceased would have been liable to pay if he had not died, in the like manner and to the same extent as the deceased. section 159 of the act creates a fiction and provides that where a person dies his legal representative shall be liable to pay any sum which the deceased would have been liable to pay if he had not died, in the like manner and to the same extent as the deceased......1968-69. the assessee was ramnarayan kakani who died on november 20, 1968. he was a broker. the legal representative of the deceased filed two returns, one up to the death disclosing an income of rs. 30,380 and another return from november 21, 1968, to march 31, 1969, declaring an income of rs. 15,613. the ito applied the provisions of section 159(1) of the act and held that the amount of rs. 15,613 was assessable in the hands of the legal representative and assessed it by clubbing it with the income of the deceased up to the date of death. the assessee, i.e., the legal representative, went in appeal against the order of the ito. the aac held that, on the facts of this case, section 168(3) of the act was applicable and two separate assessments will have to be made and he, therefore,.....
Judgment:

Vijayvargiya, J.

1. By this reference under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as ' the Act '), the Income-tax Appellate Tribunal, Indore, has referred the following question of law for the opinion of this court :

' Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the amount of Rs. 15,613 was rightly included in the income of the deceased and the income received after death could be clubbed in the income received prior to death and one assessment could be made of such income '

2. The facts of the case, in brief, are as follows : The assessment relates to the assessment year 1969-70, the previous year being the financial year 1968-69. The assessee was Ramnarayan Kakani who died on November 20, 1968. He was a broker. The legal representative of the deceased filed two returns, one up to the death disclosing an income of Rs. 30,380 and another return from November 21, 1968, to March 31, 1969, declaring an income of Rs. 15,613. The ITO applied the provisions of Section 159(1) of the Act and held that the amount of Rs. 15,613 was assessable in the hands of the legal representative and assessed it by clubbing it with the income of the deceased up to the date of death. The assessee, i.e., the legal representative, went in appeal against the order of the ITO. The AAC held that, on the facts of this case, Section 168(3) of the Act was applicable and two separate assessments will have to be made and he, therefore, directed that the sum of Rs. 15,613 shall be deleted from the assessment of the assessee. The department preferred an appeal before the Income-tax Appellate Tribunal, The Tribunal allowed the appeal, set aside the order of the AAC and restored the order of the ITO. On the application of the assessee, the Tribunal has made this reference.

3. The deceased, Ramnarayan Kakani, left behind him a will by which the entire property of the deceased has been be queathed to his son, Dr. Raghunath, who is the legal representative of the deceased. A probate of the said will was granted by the Additional District Judge, Indore, on December 19, 1969, directing Dr. Raghunath to make a full inventory of the property and to submit the same in the court within six months. The Tribunal has also found that the payment of brokerage due to the deceased has been made by the Bhandari Mills to Dr. Raghunath not on the authority of the probate but on the fact that Dr. Raghunath is the son of the deceased.

4. It was contended by the learned counsel for the assessee that the Tribunal committed an error of law in applying the provisions of Section 159 of the Act to the present case on the ground that no executor has been named in the will and the legal representative, Dr. Raghunath, received the amount of brokerage after the death of the deceased in his capacity as the legal representative of the assessee. He submitted that the Tribunal lost sight of the Explanation to Section 168 of the Act which provides that :

' In this section, ' executor ' includes an administrator or other person administering the estate of a deceased person.'

5. He submitted that as Dr. Raghunath was granted probate by a competent court and that he was otherwise administering the estate of the deceased person, he was an executor and the provisions of Section 168 of the Act were attracted to the present case. According to the learned counsel for the assessee, the provisions of Sections 159 and 168 of the Act have to be read together and in all cases income of the deceased received by him up to his death and income of the deceased received by the executor after his death have to be separately assessed. According to him, the income of the deceased up to his death has to be assessed under the provisions of Section 159 of the Act and the income of the deceased realised after his death has to be assessed under Section 168(3) of the Act. The learned counsel for the department contended that in the present case the brokerage received by the son, Dr. Raghunath, after the death of the deceased, cannot be said to be the income of the estate of the deceased and the provisions of Section 168 of the Act were not attracted and the Tribunal was fully justified in holding that the matter was governed by Section 159 of the Act.

6. Section 159 of the Act is as follows :

' 159. (1) Where a person dies, his legal representative shall be liable to pay any sum which the deceased would have been liable to pay if he had not died, in the like manner and to the same extent as the deceased.

(2) For the purpose of making an assessment (including an assessment, reassessment or recomputation under Section 147) of the income of the deceased and for the purpose of levying any sum in the hands of the legal representative in accordance with the provisions of Sub-section (1),--(a) any proceeding taken against the deceased before his death shall be deemed to have been taken against the legal representative and may be continued against the legal representative from the stage at which it stood on the date of the death of the deceased ;

(b) any proceeding which could have been taken against the deceased if he had survived, may be taken against the legal representative ; and

(c) all the provisions of this Act shall apply accordingly.

(3) The legal representative of the deceased shall, for the purposes of this Act, be deemed to be an assessee...'

7. This section provides that where a person dies his legal representative shall be liable to pay any sum which the deceased would have been liable to pay if he had not died, in the like manner and to the same extent as the deceased. This section further provides that any proceeding which could have been taken against the deceased if he had survived, may be taken against the legal representative and all the provisions of the Act shall apply accordingly. It also provides that the legal representative of the deceased shall, for the purposes of the Act, be deemed to be an assessee.

8. Section 168 of the Act deals with the income of the estate of a deceased person and it provides that the said income shall be chargeable to tax, in the hands of the executor, and further by Sub-section (3) it provides that separate assessments shall be made under this section on the total income of each completed previous year or part thereof as is included in the period from the date of death to the date of complete distribution to the beneficiaries of the estate according to their several interests.

9. In this case, we are concerned only with the assessment of the previous year, within which the deceased died, and we are not concerned with the assessment of any subsequent year. The question which arises for our consideration is whether the provisions of Section 168 of the Act are attracted because only in that event the provisions of Section 168(3) of the Act will be applicable and separate assessment in respect of income of the estate of the deceased received after his death and before the expiry of the previous year, will be required to be made. The learned counsel for the petitioner traced the history of the enactment of the provisions of Sections 159 and 168 of the Act and on that basis contended that in the instant case provisions of Section 168 are attracted. The history of legislation is relevant only when the language of the section is ambiguous and capable of two meanings. In our opinion, the language of the provisions of Section 168 of the Act and Section 159 of the Act are clear and unambiguous and, therefore, the history of the legislation is not relevant. In our opinion, Section 159 and Section 168 of the Act operate in different fields. Section 159 of the Act is concerned with the income of the deceased while Section 168 of the Act is attracted only in certain circumstances in regard to the income of the estate of the deceased. In our opinion, the arrears of brokerage payable to the deceased but received after his death cannot be said to be the income of the estate of the deceased. In CIT v. Estate of late A.V. Viswanatha Sastri : [1980]121ITR270(Mad) Shri A. V. Viswanatha Sastri, a former judge of the Madras High Court and later a senior advocate of the Supreme Court died on January 4, 1966, after executing a will on January 2, 1966, appointing his son, Shri V. Ratnam, to be the executor of the will. Shri Ratnam collected the arrears of professional fees due to the deceased after his death during the four subsequent assessment years. Shri V. Ratnam filed returns of income in his capacity as the executor of the estate of the deceased offering for assessment the income from properties, dividends and interest due to the said estate. However, the amounts realised by him as arrears of professional fee payable to the deceased were not offered for assessment. The ITO and the AAC held that the provisions of Section 168 of the Act were applicable and the arrears of fees realised by the executor were also included in the assessment. The Income-tax Appellate Tribunal, however, held that the provisions of Section 168 of the Act were not attracted to the facts of the case. On these facts, the High Court agreed with the Tribunal and held that the arrears of professional fee cannot be treated as income from the estate of the deceased. Professional fee due to the deceased as on the date of his death is admittedly one of the assets left by the deceased and, therefore, it will become part of the estate of the deceased. It was, therefore, held that on the language of Section 168 of the Act the arrears of fees realised after the death of the deceased cannot be said to be the income of the estate and, therefore, cannot be brought to charge under Section 168 of the Act.

10. Thus, if the arrears of brokerage due to the deceased and realised by Dr. Raghunath after the death of the deceased cannot constitute income of the estate of the deceased and it would partake the character of the estate of the deceased, the provisions of Section 168 of the Act are not attracted, and the same could not be assessed under the provisions of the said section. In this view of the matter, the facts whether M. Raghunath was appointed as an executor by the deceased or not or whether probate was granted to him by the court and he was administering the estate of the deceased and, therefore, under the Explanation, he became the executor of the deceased or whether the brokerage was received by him in his capacity as an executor or as an beir or legal representative of the deceased are not relevant for the decision of the question referred to us. Even if the brokerage was received by Dr. Raghunath in his capacity as the executor of the estate of the deceased since the same was not the income of the estate of the deceased, it cannot be charged to tax under Section 168 of the Act, and, therefore, it cannot be separately assessed.

11. The learned counsel for the petitioner relied on a decision of the Kerala High Court in K. Kunhi Mohammad Hajee v. State of Kerala : [1974]93ITR193(Ker) and contended that the income of the deceased after his death realised by Dr. Raghunath should be assessed separately under Section 168 of the Act. The case relied upon by the learned counsel does not help his contention. In that case, the Kerala High Court considered the relevant provisions of the Kerala Agrl. I.T. Act. In that case, the assessee died during the assessment year and the income received by him up to his death was separately assessed and income received after his death was held to be assessable in the hands of his heirs and legal representatives as tenants-in-common. As the income was derived from the estate and the estate had devolved upon the heirs of the assessee on the death of the deceased no agricultural income or arrears of agricultural income due to the deceased was realised by the legal representatives. Thus, this case is not helpful for the determination of the question whether the arrears of brokerage due to the deceased and realised by Dr. Raghunath was income of the estate of the deceased.

12. On the view which we have taken that the arrears of brokerage due to the deceased and realised by Dr. Raghunath is not the income of the estate of the deceased, and Section 168 of the Act is not applicable, the income of the deceased received up to his death and the income due to the deceased and realised by Dr. Raghunath after his death and up to the end of the previous year has to be clubbed and assessed together under the provisions of Section 159 of the Act. Section 159 of the Act creates a fiction and provides that where a person dies his legal representative shall be liable to pay any sum which the deceased would have been liable to pay if he had not died, in the like manner and to the same extent as the deceased. Therefore, although the assessee was dead, a fiction is created whereunder he is kept alive for the purposes of payment of the tax and the legal representative is made responsible for the payment thereof. It is not disputed that an executor is also included in the term ' legal representative ' because the said term is defined to have the same meaning as assigned to it in Clause (ii) of Section 2 of the CPC which states that ' legal representative ' means a person who in law represents the estate of a deceased person. The executor is a person who in law represents the estate of the deceased person. Thus, even if Dr. Raghunath is an executor, he is a legal representative of the deceased and is liable under the provisions of Section 159 of the Act. Section 24B of the Act, which was somewhat similar to the provisions of Section 159 of the Act, was considered by the Supreme Court in CIT v. Amarchand N. Shroff : [1963]48ITR59(SC) and their Lordships held thus (p. 65) :

' By Section 24B the legal personality of a deceased assessee is extended for the duration of the entire previous year in the course of which he died and, therefore, the income received by him before his death and that received by his heirs and legal representatives after his death but in thatprevious year becomes assessable to income-tax in the relevant assessment year.'

13. We are, therefore, of the opinion that the Tribunal was right in holding that the brokerage received up to the death of the deceased and arrears of brokerage received by Dr. Raghunath after his death but before the end of the previous year were liable to be clubbed together and assessed under Section 159 of the Act.

14. As a result of the discussion aforesaid, our answer to the question referred to us is in the affirmative and against the assessee. In the circumstances of the case, we make no order as to costs of this reference.


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