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H.H. Maharani Vijaykunverba Saheb Vs. Commissioner of Income-tax, Gujarat-iii - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtGujarat High Court
Decided On
Case NumberIncome-tax Reference No. 90 of 1975
Judge
Reported in(1982)1GLR212; [1982]136ITR18(Guj)
ActsIncome Tax Act 1961 - Sections 159, 168, 168(1), 168(2) and 168(4)
AppellantH.H. Maharani Vijaykunverba Saheb
RespondentCommissioner of Income-tax, Gujarat-iii
Appellant Advocate J.M. Thakore, Adv.
Respondent Advocate N.U. Raval, Adv.
Cases ReferredAsit Kumar Chose v. Commr. of Agrl. I.T.
Excerpt:
direct taxation - foreign income - sections 159 and 168 of income tax act, 1961 - whether tribunal justified in holding that income from properties in united kingdom chargeable to tax in hands of assessee - assessments made treating assessee as executors - character of assessee as executors not argued before tribunal - tribunal failed to apply its mind on material on record - tribunal failed to consider and decide question in all its legal and factual aspects - court declined to answer reference. - - 1. maharaja mahendrasinghji of morvi owned extensive property situate in india as well as in england. 17. what happens to the representation of the estate of the deceased and how is it to be administered when there are two or more executors ? the law on this point is also well settled......desai, j.1. maharaja mahendrasinghji of morvi owned extensive property situate in india as well as in england. the property yielded considerable income. he died possessed of those properties. he had executed two distinct wills, one of the property in india, another of property situate in england. the will governing the property situate in india was executed on october 31, 1953. a codicil to the said will was executed on february 9, 1956. the will in respect of the property situate in england was executed on june 4, 1954. under each will the late maharaja had appointed different executors. the assessee, widow of the deceased maharaja, was amongst the executors appointed of the property situate in india and is now the sole surviving executrix in respect of such property. she was, however,.....
Judgment:

Desai, J.

1. Maharaja Mahendrasinghji of Morvi owned extensive property situate in India as well as in England. The property yielded considerable income. He died possessed of those properties. He had executed two distinct wills, one of the property in India, another of property situate in England. The will governing the property situate in India was executed on October 31, 1953. A codicil to the said will was executed on February 9, 1956. The will in respect of the property situate in England was executed on June 4, 1954. Under each will the late Maharaja had appointed different executors. The assessee, widow of the deceased Maharaja, was amongst the executors appointed of the property situate in India and is now the sole surviving executrix in respect of such property. She was, however, not appointed as an executrix in respect of the property situate in England.

2. For the assessment years 1965-66, 1966-67 and 1967-68, the previous years being the financial years ended on March 31, 1965, March 31, 1966, and March 31, 1967, respectively, returns of income were filed by the executors of the property situate in India. The assessment order for the assessment year 1965-66 was passed on January 31, 1970, computing the total income at Rs. 3,81,842 and the net taxable income at Rs. 2,54,117 (including foreign income of Rs. 95,813) against 'the Executors of the Estate of Late Maharaja Mahendrasinghji of Morvi' in the status of AOP. The assessment order for the assessment year 1966-67 was passed on December 29, 1970, computing the total income at Rs. 3,84,968 and the net taxable income at Rs. 2,37,517 (including 'foreign income' of Rs. 1,04,467) against 'H. H. Maharani Vijaykunverba of Morvi and M. P. Dadachanji, Surviving Executors of the estate of Late Maharaja Mahendrasinghji of Morvi' in the status of AOP. The assessment order for the assessment year 1967-68 was passed on September 15, 1971, computing the total income at Rs. 3,48,422 and the net total income at Rs. 2,07,700 (including 'foreign income' estimated at Rs. 1,05,000) against 'H. H. Maharani Vijaykunverba & H. P. Dadachanji, Surviving Executors of the Estate of Late Maharaja Mahendrasinghji of Morvi in the status of AOP. It is not in dispute that the sums described as 'foreign income' and included in the aforesaid three assessments represented the income derived by the executors from the property situate in England.

3. Against the orders of assessment aforesaid, three separate appeals were preferred to the AAC. The grounds raised in the appeals included the contention with regard to 'wrongful taxation of U.K. income'. The submission before the AAC was that the income arising from the property situate in England, which constituted the income of a distinct set of executors separately appointed under a different will in respect of such property, could not be taxed in the hands of the executors of the property situate in India and that since the testator had made two distinct wills in respect of property situate in two different countries, the property situate in each country should be regarded as constituting a separate estate within the meaning of s. 168 of the I.T. Act, 1961, and income from each of such estates was liable to be taxed separately. The argument, in other words, was that they were two separate and distinct assessable entities and that the income of one estate could not be clubbed with the income of the other. The AAC disposed of the appeals by his separate orders dated February 1, 1972. He held that a single assessment of the entire income including the income derived from the property situate in England against the executors in the status of AOP was properly made. This conclusion was based on the grounds tha : (i) 'estate' means one's collective assets and liabilities and a person can, therefore, have only one estate, (ii) the entire estate of the late Maharaja, wherever situate, therefore, constituted a single estate, notwithstanding the appointment of separate sets of executors therefor, (iii) though the executors of the property situate in England were not members of the AOP yet the said executors should also be deemed to have become members of such AOP, since the income derived from such property was included in the assessment, and (iv) the consideration whether or not the executors of the property situate in India had received the whole or any portion of the income from the executors of the property situate in England was not relevant for the purpose of bringing the entire income to tax under s. 168 in the hands of the AOP against whom the assessments were made. The appeals were accordingly dismissed, so far as the point under consideration is concerned.

4. There were further appeals before the I.T. Appellate Tribunal against the aforesaid decisions The submission before the Tribunal was that the relevant provisions of the income-tax were required to be read along with the provisions of the Indian Succession Act, 1925, and that since under the latter Act, only such estate vested in legal ownership in the executors in respect of which they were appointed executors under the will, there were in the eye of law two separate estates-one situate in India and the other in England- and that in the hands of the executors of the estate in India, only such income could be brought to tax as arose or accrued to them out of such estate and that the income arising from the estate in England could not could not be clubbed with such income and brought to tax in their hands, because neither the estate nor the income arising from that estate vested in the executors of the property situate in India.

5. The Tribunal found tha : (i) there was nothing in the assessment orders to indicate that any objection was raised on behalf of the executors against the inclusion of the income from the property situate in England in their assessments (ii) the material provisions of the Indian Succession Act, 1925, can have no bearing on the construction of s. 168 of the Act; (iii) under s. 168, what is chargeable to tax is the income of the 'estate' of a deceased person and 'estate' for the purposes of the said section would mean the whole and not part of the estate, (iv) there was only one assessable entity, namely, the estate of the deceased and the income therefrom was chargeable to tax in the hands of the executor, if there was only one executor, as if he were an individual, and if there were more than one executors, then in the hands of the executors in the status of an AOP, (v) the assessable entity, therefore, remained one and single and it cannot vary according to the number of executors appointed for different properties left by the deceased, and (vi) in the present case, the estate consisted of property situate both in India and England and the entire income from the whole of the estate was liable to be brought to tax, irrespective of whether the tax assessed as payable exceeded income from the property situate in India. In the light of the aforesaid findings, the Tribunal dismissed the appeals.

6. At the instance of the assessee, the Tribunal has stated a case in respect of the following questio :

'Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the income from the properties in the United Kingdom was chargeable to tax in the hands of the assessee ?'

7. The question, which arises for determination, rests for its determination on the true and correct interpretation of s. 168. Before we consider the provisions of the said section, however, it would be convenient to briefly refer to the contents of the two wills.

8. Under the will dated October 31, 1953, which related to the disposition of property situate elsewhere than in England, Scotland, Northern Ireland, Eire, the Isle of Man and the Channel Islands, the testator appointed his wife (the assessee), his uncle and his solicitor to be the executrix and executors and trustees of his will. A number of persons were successively named as executors in case the uncle or solicitor predeceased or was unable or unwilling to accept executorship. The will also appointed certain persons as guardians of the minor children of the testator during their respective minority. The testator declared that except such property as was earmarked for the Ruler of Morvi State, all his property, estate and effects were his self-acquired property and that he had full and absolute power to dispose of the same by his will, including certain immovable properties which stood in the joint names of himself and his wife. The testator directed monthly payments in certain sums by way of jivai being made to the three Maharanis and also provided, inter alia, that they would be entitled to continue to occupy the residential accommodation in Bombay or in Morvi or in Poona, which each of them occupied at the time of his death, with rent, if any, paid for such residential accommodation out of the income of the estate. The testator then made provision for his unmarried daughters living at the date of his death and directed that certain Government securities held din the joint names of himself and his wife with all accumulations of interest shall be divided into as many equal shares as there were unmarried daughters living at the time of his death and that each of such shares shall be held in trust by the executors for such unmarried daughters and the income therefrom shall be accumulated until the marriage of each of such daughters and on the occasion of each marriage, a sum up to Rs. 1,00,000 shall be spent and the balance of the concerned securities or sale proceeds thereof shall be paid and given to each daughter on her marriage. For the maintenance, education, welfare and benefit of such unmarried daughters, the direction was that the executors shall pay a sum of Rs. 1,000 per month to each of such daughters out of the income of the estate. All estate, effects and property, both movable and immovable, governed by the will and not otherwise disposed of thereunder, were constituted the residuary estate after payment of funeral and testamentary expenses and debts and legacies and such residuary estate was left to the son absolutely, if there be only one son at the time of the death of the testator, and, in case the testator left behind more than one son, the estate was to be divided into two equal parts or shares and one of such equal parts or shares was bequeathed to the eldest son absolutely and the other equal part or share was to be divided in equal shares amongst the sons other than the eldest son. There were further directions with regard to the disposition of the residuary estate in case there was no son living at the time of the testator's death. But they need not be set out. There were also further directions given in the will with regard to the administration and investment of funds of the estate, reimbursement of the executor or trustee in the event of retirement, death, etc.

9. By the codicil dated February 9, 1956, the testator revoked the provisions made in his will with regard to marriage, maintenance, education, welfare and benefit of his unmarried daughters, in view of the fact that his mother had, by four deeds of trust, executed after the execution of the will but before the execution of the codicil, made provision for the said daughters.

10. The will dated June, 4, 1954, appointed the Lloyds Bank Ltd., and two solicitors having their office in London to be the executors and trustees of the will. The will expressly confirmed the will with the codicil thereto made in India relating to the disposition of the property situate elsewhere than in England, Scotland, Northern Ireland, Eire, the Isle of man and the Channel Islands. Under the will, the testator left to his wife free of duty 'such sum as shall represent the aggregate of the sums that stand to my credit in my several banking accounts in the aforesaid countries'. The remainder of the estate was devised and bequeathed upon trust unto the trustees absolutely with the direction that they shall, at such time or times and in such manner as they shall think fit, sell, call in and convert into money such parts thereof as may not consist of money, subject, however, to full power to postpone such sale and conversion for such a period as the trustees, without being liable to account, might think proper. The trustees were directed to pay funeral and testamentary expenses and debts and legacies bequeathed under the will and then with the consent of his wife during her lifetime and afterwards at the discretion of the trustees, to invest the residue of monies in or upon any of the investments authorised under the will. The trustees were directed to stand possessed of the residuary trust fund consisting of the residue of monies and of investments for such of the male children of the testator who survived him and attained the age of 21 years and, if more than one, one-half thereof for the eldest of such male children. There were further provisions with regard to disposition in case of the death of a son during the lifetime of the testator and in case of no male child surviving the testator or surviving up to the age of 21 after the death of the testator. In the latter event, the trustees were directed to hold the residuary trust fund upon trusts to pay the income thereof unto the wife of the testator during her lifetime and, after her death, to hold such estate in equal shares, if more than one, for all the daughters of the testator who attained the age of 21 years or married under that age absolutely. There were further directions with regard to the administration of the estate with which we are not concerned. One of the final declarations was that the will shall in all respects be interpreted and have effect in accordance with the provisions of the English law and that in particular the trustees shall have all the powers conferred upon trustees by ss. 31 and 32 of the Trustees Act, 1925.

11. Before we turn to the relevant provisions in the income-tax law with regard to the assessment of the income of a deceased person or of his estate, it would be advantageous to recall that dead men are no longer persons in the eye of law. They have laid down their legal personality with their lives, and are now as destitute of rights as of liabilities. They do not even remain the owners of their property until their successors enter upon their inheritance. And yet, the law does, in some degree, recognise and take account after a man's death of his desires and interests when alive. Amongst the things in respect of which the anxieties of living men extend beyond the period of their deaths, in such sort that the law will take notice of them, is his estate. For many years after a man is dead, his hand may continue to regulate and determine the disposition and enjoyment of the property which he owned while living. His last will, duly declared in the document which is significantly called by that name, is held inviolable (generally speaking) by the law. For half a century and more, the rights and responsibilities of living men may thus be determined by an instrument which was of no effect until the author of it was in his grave and had no longer any concern with the world or its affairs (See Salmond on Jurisprudence, 12th Edn., pp. 301, 302, 444).

12. This power of the dead hand (mortus manus) is so familiar a feature in the law that we accept it as a matter of course, and have some difficulty in realising what a singular phenomenon it in reality is. We speak of the estate of a deceased person as if it were itself a person. We say that it owes debts, or has debts owing to it, or is insolvent. The law, however, recognises no legal personality in such a case. The rights and liabilities of a dead man devolve upon his heirs, executors and administrators, not upon any fictitious person known as his estate (See Salmond on Jurisprudence, 12th Edn., pp. 306,444).

13. We are herein concerned with executors and let us, therefore, consider the position of an executor and the mode of his appointment, his powers, functions and duties under the general law.

14. The word 'executor' as the term is at present accepted, signifies '... the person appointed, ordinarily by the testator by his will or codicil, to administer the testator's property and to carry into effect the provisions of the will'. (See Halsbury's Laws of England, 4th Edn., Vol. 17, paragraph 702 at p. 373). Section 2(c) of the Indian Succession Act, 1925, defines the word 'executor' to mean a person to whom the execution of the last will of a deceased person is, by the testator's appointment, confined.

15. In the ordinary course, a person is appointed executor indefinitely and is, therefore, charged with the administration of the whole will and of all the testator's property. As Swinburne said in the sixteenth century.

'To appoint an executor is to place one in the stead of the testator, who may enter into the testator's goods and chattels, and who hath action against the testator's debtors, and who may dispose of the same goods and chattels towards the payment of the testator's debts, and performance of his will.'

16. The testator may, however, make two distinct wills, one of property in his own country, another of property abroad, and he may appoint certain person executors of his property within the country and others of his property abroad. Even in the same will, a testator may appoint different executors for different parts of his estate wherever situate. In the ordinary course, however, an executor's appointment is absolute and he is charged with the administration of the whole will and of all the testator's property. When the testator appoints an executor in respect of a particular or special property, such an executor is called a special executor. Executors appointed generally for all the property are called the general executors (See Jarman on Wills, 8th Edn., p. 157, Williams on Executors and Administrators, 14th Edn., p. 19, Executors and Administrators, 5th Edn. by Mustoe, pp. 1 & 2 and Halsbury's Laws of England, 4th Edn., Vol. 17, paras. 712 and 713). Sections 224, 248, 255 and 257 of the Indian Succession Act, 1925, which respectively provide inter alia, tha : (a) when several executors are appointed, probate may be granted to them all simultaneously or at different times; (b) if an executor is appointed for any limited purpose specified in the will, the probate shall be limited to that purpose; (c) whenever the nature of the case requires that an exception be made, probate of a will shall be granted subject to such exception; and (d) whenever a grant with exception of probate has been made, the person entitled to probate of the remainder of the deceased's estate may take a grant of probate of the rest of the deceased's estate, recognise that an executor can be appointed for a limited or specified purpose or absolutely and that where a testator appoints two executors or two sets of executors, one for general purposes, and another for a limited purpose, probate shall be granted to both by the same instrument distinguishing the powers of each of them, when there is an application by both. However, if an application is only by a special executor, a probate will be granted to him only limited to the purpose relatable to his appointment, and if the application is made by the general executor, a probate will be granted to him as in the ordinary case, but with a reservation to the special executor for obtaining the limited probate.

17. What happens to the representation of the estate of the deceased and how is it to be administered when there are two or more executors The law on this point is also well settled. If there are two or more executors, they are regarded as one person, and they have ordinarily a joint interest in the estate. All co-executors are regarded in the light of an individual person and they have, therefore, a joint and entire interest in the estate of the testator, which is incapable of being divided; and in case of death of any executor, such interest vests in the survivor without any new grant by the court. Hence, subject to what is said hereafter, the acts of any one of them done for the purpose of administration are deemed to be the acts of all, for, they have all a joint and entire authority over the whole property. But general executors and special executors may act independently in regard to the administration of the property separately vested in them. For example, where the testator has appointed special executors for property situate abroad and other persons to be his general executors with regard to the property within the country, the latter can take title to the testator's estate within the country without the concurrence of the special executors. All the co-executors, therefore, of a deceased person are ordinarily his legal representatives for all purposes (See Williams on Executors and Administrators, fourteenth edition, pp. 372 and 432, and Executors and Administrators, 5th Edn., by Mustoe, p. 57). Sections 211, 311 and 312 of the Indian Succession Act, 1925, which provide, inter alia, tha : (a) the executor of a deceased person is his legal representative for all purposes, and all the property of the deceased person vests in him as such, (b) when there are several executors, the powers of all may, in the absence of any direction to the contrary, be exercised by any one of them who has proved the will, and (c) upon the death of one or more of several executors, in the absence of any direction to the contrary in the will all the powers of the office become vested in the survivors or survivor reflect in their provisions the aforesaid well-established position of law.

18. What is the nature or quality of the interest of an executor in the estate of the deceased The position of an executor is a peculiar one. He is appointed by the will, but then, by virtue of his office, by the operation of law and not under the bequest in the will, he takes a title to the property of the testator which vests in him. The interest, which an executor has in the property of the testator which vests in him The interest, which an executor has in the property of the deceased, is very different from the absolute and ordinary interest which everyone has in his own property; for, an executor has his estate as such in autre droit merely, viz., as the minister or dispenser of the property of the dead (See Williams on Executors and Administrators, 14th Edn., p. 264, and Executors and Administrators, 5th Edn. by Mustoe, p. 57). Section 211 of the Indian Succession Act, 1925, which provides, inter alia, that 'all the property of the deceased person vests in him as such', makes it clear that it is only the legal estate that vests in the executor and trustees and even if this is not the case, an executor may become a trustee by his dealings with the assets. When an executor is functus officio as to any of the assets and still retains them in his possession, he becomes clothed with the character of a trustee of those assets. For instance, as soon as the executor has assented to a legacy, he becomes a trustee of the subject-matter of the legacy for the legatee; or when the residuary estate is vested in the executor upon trust for sale and distribution according to the directions contained in the will, the executor holds the residue as a trustee. In such circumstances, the executor loses his vested right of property as executor and becomes, so far as the title to it is concerned, a trustee under the will (See Executors and Administrators, 5th Edn. by Mustoe, pp. 67 & 69).

19. Against the aforesaid background, we must now move on to the consideration of the relevant provisions with regard to the assessment of the income of a deceased person or of his estate as contained in the income-tax law. In Ellis C. Reid v. CIT [1931] 5 ITC 100, the Bombay High Court held that according to the income-tax law, as it then stood, where a person died after the commencement of the assessment year but before his income of the previous year was assessed, his executor was not liable to pay the tax and if the death occurred whilst the assessments were pending, the proceedings could not be continued and the assessment could not be made after the person's death. This lacuna in the machinery of assessment was rectified by the enactment of s. 24B in the Indian I.T. Act, 1922, by the Indian I.T. (Second Amend.) Act, 1933. By the incorporation of s. 24B, the Legislature extended the legal personality of a deceased assessee under the Act, which had deceased on his death, and, therefore, the income received by him before his death or, if he died during the previous year, by his heirs and legal representatives after his death in that previous year, became assessable to tax in the relevant assessment year. Section 24B, however, did not authorise levy of tax on receipts by the legal representative of a deceased person in the year succeeding the year of account being the previous year in which such person died. In other words, the legal personality of a deceased assessee was extended under the said section 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 that previous year became assessable to tax in the relevant assessment year. The Legislature not having made any provision generally for assessment of income receivable by the estate of the deceased person, s. 24B was held not to supply the machinery for taxation of income received by a legal representative to the estate after the expiry of the year in the course of which such person died. (See CIT v. Amarchand N. Shroff : [1963]48ITR59(SC) and CIT v. James Anderson : [1964]51ITR345(SC) ).

20. In the present Act, s. 159 replaced s. 24B and it provides a machinery for the assessment of tax on the income of a deceased person on whom the tax had been originally charged. Thereunder, it is expressed recognised that upon the death of the assessee, the liability to pay any sum which the deceased would have been liable to pay, if he had not died, is that of his legal representative and for the purposes of the Act, the legal representative is treated as an assessee. If at the date of the death of the deceased assessee, a return in respect of the income earned by him in the previous year had already been filed and the assessment proceeding had commenced, it would not be necessary to start the proceeding afresh against the legal representative, since any proceeding taken against the deceased prior to the date of his death is, by a fiction, deemed as having been taken against the legal representative. From that stage onwards, however, the proceeding must be continued against the legal representative who, in the eye of law, represents the legal personality of the deceased assessee and the provisions of the Act will apply accordingly.

21. On its apparent tenor, s. 159 enables the making of an assessment on the legal representative in respect of the income which accrued or arose to or was received by the deceased assessee. It does not authorise an assessment on the legal representative in respect of the income received by such legal representative after the demise of the deceased on account of the estate having been vested in him. Standing by itself, therefore, s. 159 does not advance the position further than that which obtained under s. 24B of the previous Act. However, what s. 159 leaves untouched a covered by s. 168 of the present Act. Under s. 168, subject to the other provisions contained in the said section, the income of the estate of deceased person is chargeable to tax in the hands of the executors, (a) if there is only one executor, then, as if such executor were an individual; or (b) if there are more executors than one, then, as if such executors were an association of persons. For the purposes of the Act, the executor is deemed to be resident or non-resident according as the deceased person was a resident or non-resident during the previous year in which his death took place (see s. 168(1)). The assessment of an executor is required to be made separately from any assessment that may be made on him in respect of his own income (see s. 168(2)). Separate assessments under s. 168 are required to be made on the total income of each completed previous year or part thereof as is included in the period from the date of the death to the date of complete distribution to the beneficiaries of the estate according to their several interests (see. 168(3)). In computing the total income of any previous year under s. 168, any income of the estate of that previous year distributed to, or applied to the benefit of, any specific legatee of the estate during that previous year is required to be excluded; but the income so excluded must be included in the total income of the previous year of such specific legatee (see s. 168(4)). For the purposes of s. 168, 'executor' includes an administrator or other person administering the estate of a deceased person.

22. Reading the provisions of s. 159 and s. 168 together, it appears that s. 159 applies to the assessment of the income of the deceased only up to the date of his death and not up to the end of the accounting year in which the death occurred. The income of the estate for the period from the date of death up to the end of the accounting year in which the death occurred and for the subsequent accounting years is required to be assessed under s. 168. Section 168 alone, therefore, governs the assessment of the income of the estate of a deceased person and contemplates the levy of tax on such income in the hands of the executor in accordance with the provisions of the said section.

23. Having set out the factual and legal position, we turn to the consideration of the questions raised before us on behalf of the assessee. The submission on behalf of the assessee was as follow :

(1) In respect of two separate sets of property situate in two different countries, the deceased Maharaja executed two separate wills whereunder two distinct sets of executors were appointed. There were, therefore, two separate estates and only such estate vested in legal ownership in the distinct set of executors in respect of which they were appointed executors under the will. Consequently, in the hands of the executors of the estate in India, only such income could be brought to tax as arose or accrued to them out of such estate and the income arising from the estate in England could not be clubbed with such income and brought to tax in their hands under s. 168.

(2) Alternatively, even if it is assumed that the estate was one and single and that the income of such estate was chargeable to tax in the hands of all the executors collectively, the assessment could be validly made only if all the executors are served with notice and are present before the assessing authority and are collectively taxed as association of persons.

(3) Section 168 is inapplicable in the instant case because on a true construction of the will dated June 4, 1954, in regard to the property situate in England, the executors appointed under the said will had since assumed the character of trustees and they held the property and realised the income therefrom as trustees. Income received by them as trustees could not be clubbed with the income received by the executors appointed under the will dated October 31, 1953, in regard to the property situate in India and brought to tax under section 168. We proceed to deal with these grounds seriatim.

24. R : Ground No. :

25. The broad submission regarding separate estates is wholly misconceived and it cannot be accepted having regard to the general position of law as well as the specific provisions of s. 168. As earlier pointed out, jurisprudentially, the estate of a deceased person by itself has no legal personality. The rights and liabilities of a dead man devolve upon his heirs, executors and administrators and not upon any fictitious entity known as his estate. However, the law recognises and gives effect after a person's death to his desires as expressed in his last will and testament in regard to his estate and the disposition and enjoyment of the property which he owned while living is regulated and determined as laid down in the will. The executor appointed by the dead man under his will or codicil administers the estate in accordance with the provisions of the will.; For the convenient administration of his estate, the law permits a person to make more than one will in respect of different items of his property and to appoint different executors in respect of different parts of his property. It is true that in such a case the different executors take title to the separate parts of estate and that they may act independently in regard to the administration of the property separately vested in them. However, all such executors are the legal representatives of the deceased person and they are the ministers or dispensers of the estate of the deceased which vests in them in separate parts but which still nevertheless is the estate of the deceased. Indeed, the word 'estate' means the totality or entirety of the property of a deceased, as is evident from the following statement of law explaining the true import of the said word in Black's Law Dictionary, 5th Edition, at page 49 :

'The total property of whatever kind that is owned by a decedent prior to the distribution of that property in accordance with the term of a will, or, when there is no will, by the laws of inheritance in the State of domicile of the decedent. It means, ordinarily, the whole of the property owned by anyone, the reality as well as personality. As used in connection with the administration of the decedent's estate, terms include property of a decedent, trust or other person as such property exists from time to time during the administration and hence may include probate, asset as well as property passing by intestacy.'

26. In Stroud's Judicial Dictionary, 4th Edition, Vol. 2, at page 937, it had been stated, inter alia, 'the word 'estate' doth comprehend all that a man hath property or ownership in... 'It would thus appear that merely because in respect of two separate sets of property situate in two different countries, a deceased person has executed two separate wills whereunder two distinct sets of executors are appointed, there are no two separate estates. The estate, which was one and single during the lifetime of the testator, still continues as such even after his death, though its administration and dispensation may be vested in separate parts in different persons. The theory that under such circumstances there are two separate estates has thus no basis in general law.

27. So far as s. 168 is concerned, the position is no different. Against the background of the legislative history referred to earlier, it is clear that the underlying object of the said provision is to extent the legal personality of a deceased assessee so as to levy tax on the income received by the legal representatives of such assessee in the periods subsequent to the date of the death till the date of the complete distribution to the beneficiaries the estate according to their several interests. The machinery therein provided for the taxation of the income of the estate of a deceased person postulates that such estate is to be treated as one and whole and as indivisible. It indicates that the estate which was one and single prior to the death of the deceased assessee is not to be treated as one and whole and as indivisible. It indicates that the estate which was one and single prior to the death of the deceased assessee is not to be treated as having split into several estates merely because, for the convenient administration, thereof separate executors are appointed. Sub-section (1) of s. 168 contemplates and takes care of such a situation by providing that the income of the estate of a deceased person shall be chargeable to tax in the hands of the executor, if there are more executors than one, then as if the executors were an association of persons. Therefore, in the case of a plurality of executors, whether they are general executors charged with the administration of the whole of the estate or whether they are special executors in respect of different parts of property, such executors are to be assessed to income-tax as if they are an association of persons. The machinery thus provided ensures the entire income of the whole estate being brought to tax in the hands of the executors under a single assessment. Even sub-ss. (3) and (4) of s. 168 require the estate being looked upon as a single whole and not as separate estates, whatever might be the arrangement made for the administration of such estate by the deceased assessee.

28. In our opinion, therefore, the broad submission made on behalf of the assessee with regard to there being separate estate is not well founded in law. The estate of the deceased Maharaja situate within and outside the country is to be treated as one and indivisible for the purposes of the levy of tax under s. 168, irrespective of the fact that there are separate sets of executors appointed under two different wills in respect of the property situate within and without the country. The income from the whole of such estate can be brought to tax in the hands of the executors in the course of a single assessment made against such executors in the status of an association of persons. The clubbing of income which arose or accrued to the executors out of such estate, whether the estate be situate outside India or in India and whether it is vested in general executors or special executors, is permissible under s. 168.

29. The subsidiary submission under this head, namely, the taxability of the income arising from the property situate in England in the hands of the executors of the property situate in India, on the facts and in the circumstances of the case, is essentially linked up with the second ground urged on behalf of the assessee and it will be convenient to deal with the question while considering the said ground.

30. R : Ground No. :

As earlier pointed out under s. 168, in case of there being more executors than one, the income of the estate of a deceased person is to be brought to tax in the hands of such executors, as if the executors were and association of persons. In the instant case, the returns were filed and the assessments were made against the executors of the estate of the late Maharaja in the status of an association of persons. While making the assessments, the income derived from the property situate abroad has also been taken into consideration. So far as the assessment orders for the assessment years 1966-67 and 1967-68 are concerned, the names of only two executors are specifically mentioned and they are described as the 'surviving executors of the estate of late Maharaja Mahendrasinghji of Morvi'. It would thus appear that so far as those two assessment periods are concerned, the assessment has proceeded only against the executors of the property situate in India although while computing the taxable income, the income of the property situate abroad in respect of which separate executors were appointed under the will dated October 31, 1953, is taken into account. It would not be unreasonable to assume, however, that the income received from the property situate abroad might have been included in the assessments in question only upon the relevant information being furnished by the concerned executors. Besides, the Tribunal has observed as follows on this aspect of the matte :

'There is nothing in the assessment orders for the aforesaid assessment years to indicate that any objection was raised on behalf of the executors against inclusion of the income from properties situate in foreign countries, which is described as 'foreign income' in the assessment orders.'

31. In the statement of case, however, it had been mentioned that at the time of the finalisation of the statement it was submitted on behalf of the assessee that the assessee had, in fact, objected to the inclusion of the income from the property situate abroad when the assessee was heard by the ITO. Apart from mentioning such submission, however, the Tribunal has not said anything further. Before the AAC an objection appears to have been taken on the ground that the executors of the property situate abroad having not been treated as members of the association of persons, the assessment of income received from such property could not have been made in the instant proceeding by clubbing it along with the income received from the property situate within the country. The AAC found that since the income from the property situate abroad was included in the assessments, the executors of such property should be 'deemed to have become members of the association of persons' and that 'it is not necessary that the returns should also have been signed by all the members of the association of persons'. When the matter went before the Tribunal, the emphasis was on the aspect of there being two distinct and separate estates and the requirement of the income from each estate being separately taxed. The order of the Tribunal does not indicate that any specific objection was raised on the ground under consideration and all that we find stated in the order of the Tribunal in regard to this aspect is what has been extracted above. The question which arises against the aforesaid background is whether the assessee can be permitted to agitate this contention.

32. It appears to us that since, in the instant case, the executors of the estate of the deceased Maharaja, who are taxed in the status of an association of persons, appear to have furnished to the ITO the relevant information with regard to the income derived from the property situate abroad and they allowed the assessment of such income being made by the ITO in their hands without any objection, after affording to them a full opportunity of being heard, it is not open to them to take up the plea at a later stage, as a last resort or an after-thought, that the assessment of such income in their hands is not permissible unless all the executors were served and collectively taxed as association of persons. Section 168 merely prescribes the method for making an assessment of tax in a special case. It does not bear upon the initial jurisdiction of the taxing authority but deals with matters incidental to it. If the assessing authority, in the exercise of its jurisdiction, omits to take one or more of the various procedural steps or commits and error of procedure, the assessment would be null and void only if the omission, error or breach, as the case may be, is so fundamental as could not be waived because if affects the inherent jurisdiction. In the instant case, the assessment is made on the executors of the estate of the deceased Maharaja. Some at least of the executors were present before the taxing authority. They did not object to the inclusion of the income derived from the property situate abroad in the computation of the total income upon which tax was to be levied in their hands. Indeed, they appear to have furnished the requisite information either in the return or otherwise, which is not clear from the record. The Tribunal has, in terms, found so and although in the statement of case it has been mentioned that a submission was made on behalf of the assessee that an objection was, in fact, taken, the Tribunal has not recorded any further finding on the point. Under these circumstances, the executors must be taken to have exercised the option of abandoning the plea that such income cannot be brought to tax in their hands and they, having not raised an objection at the appropriate time, must be taken to have waived the same (See CIT v. Sumantbhai C. Munshaw : [1981]128ITR142(Guj) ). We are, accordingly of the opinion that the second objection raised on behalf of the assessee is not well founded and that it cannot be entertained.

33. R : Ground No. :

It is true that s. 168 deals with the assessment of the income of the estate of a deceased person in the hands of an executor. The period during which the section applies and remains operative is from the date of the death to the date of complete distribution to the beneficiaries of the estate according to their several interests. The income of the estate during that entire period computed in accordance with the provisions of the Act (after giving effect to sub-s. (4) of s. 168 in the process of such computation) is to be assessed in the hands of the executor by separate assessments made on the total income of each completed previous year or part thereof covered by the said period. If, therefore, the executor becomes functus officio as to any part or whole of the estate and still retains such part or whole in his possession in the character of a trustee either under the provisions of the will or on account of his dealings, s. 168 would obviously become inapplicable from the point of time the executor has become functus officio.

34. The legal position in regard to the nature and quality of the interest of the executor in the estate of the deceased and the point of time when an executor, even if he is also named as the trustee, sheds the former character and assumes the latter character is well settled. As earlier pointed out, the property of the deceased vests in the executor only for the purpose of representation and administration. In other words, it is only the legal estate that vests in the executor and the vesting is not of the beneficial interest. Still, however, while the administration is incomplete, the executor holds the estate and receives its income on behalf of himself as the person in whom the estate lies vested at that time. It is possible, however that a will may appoint the same person to be an executor and a trustee or an executor may become a trustee by the manner of his dealings with the estate. However, till the administration has not reached such a point that it could be inferred that the administration has been completed, the executor does not become functus officio and continues to hold the estate and receives income therefrom as an executor and representative of the deceased. As soon as, however, the administration has been completed, say, by the residuary estate having been ascertained and the legacy having been assented to, the executor becomes functus officio and even if he still retains the estate in his possession, he becomes clothed with the character of a trustee. Under such circumstances, the executor loses his vested right of property as an executor and becomes, so far as the title to it is concerned, a trustee under the will and the receipt by him of the income from the estate in his possession is thenceforth in the character of a trustee. The decisions of the Madras High Court in V. M. Raghavalu Naidu and Sons v. CIT : [1950]18ITR787(Mad) and of the Calcutta High Court in Asit Kumar Chose v. Commr. of Agrl. I.T. : [1952]22ITR177(Cal) lend support to the aforesaid view.

35. In the instant case, the question in issue before the Tribunal, indeed, was as to the chargeability of the income from the property in the United Kingdom in the hands of the assessee against whom assessments were made as executors. In other words, the question of chargeability to tax of such income in the hands of the assessee in the character of executors was clearly under issue. Even the question referred for our opinion is widely worded and brings into controversy the issue as regards the chargeability of the income from the property in the United Kingdom to tax in the hands of the assessee in the character of executors. However, it cannot be gainsaid that the above-mentioned aspect of the question was not argued before the Tribunal. Indeed, as pointed out by the Tribunal in the forefront of its order, the wills in question were not even produced before it. The wills have come on the record of the reference only as accompaniments to the statement of case. Under the circumstances, the Tribunal has not at all applied its mind to the above-mentioned aspect of the question, namely, whether qua that part of the estate situate in the United Kingdom, which was the subject-matter of the will dated June 4, 1954, the concerned executors had become functus officio and held such property and derived income therefrom in the character of trustees. The question cannot be answered from that angle merely by the interpretation of the will, for, factual aspects ar also involved.

36. Two courses are, therefore, open to u : To call for a supplementary statement of the case from the Tribunal or to decline to answer the question and leave it to the Tribunal to take appropriate steps to adjust its decision in the light of the well-settled legal position referred to earlier. Following the decision of the Supreme Court in CIT v. Indian Molasses Co. Pvt. Ltd. : [1970]78ITR474(SC) , we consider it appropriate to decline to answer the question on the ground that the Tribunal has failed to consider and decide the question in all its legal and factual aspects. It will be open to the Tribunal to dispose of the appeals before it in the light of the observations made by this court after determining the said aspect which ought to have been decided. We wish to make it clear, however, that it would not be open to the assessee to raise before the Tribunal the questions which are already concluded by this decision.

37. In the result, for the reasons aforesaid, we decline to answer the question referred to us by the Tribunal for our opinion. Each party shall bear its own costs of the reference.


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