Ramachandra Iyer, J.
1. This reference relates to the assessment of the estate of one VR. RM.S. Chockalingam Chettiar represented by S.VR. Veerappa Chettiar and S.V. Viswanathan Chettiar for the year 1951-52, the previous year ending with 13th April, 1951. Chockalingam Chettiar and his two sons, Veerappa Chettiar and Viswanathan Chettiar, were living as members of a joint family. Chockalinga acquired substantial properties in Johore Bahru in Malaya. On the 3rd February, 1949, he executed a will in respect of his properties at Johore Bahru, in accordance with the law of that country. Shortly thereafter, that is, on 18th April, 1949, Chockalinga died, leaving behind him his two sons and a daughter, Meenakshi. Veerappa and Viswanatha were appointed as the executors and trustees under the will, and they were directed to pay Meenakshi a sum of Rs. 20,000 within two years of the death of the testator : in default Meenakshi was to obtain by way of a legacy a property, a building in the township of Johore Bahru. The testator bequeathed the residue after payment of his debts, legacies, funeral expenses and testamentary expenses as follows:
I give devise and bequeath all the rest and residue of my property and estate of whatever nature and wheresoever situate (hereinafter called the residuary estates) unto my trustees upon the following trust, that is to say:
(a) My trustees shall immediately after the expiry of three years after my death divide my residuary estate in two equal parts and shall transfer, convey and assign one such equal part to my son Ravana Mana Sona Veerappa Chettiar also known as Sona Veena Rana Veerappa Chettiar for his own absolute use and benefit. I hereby direct that the remaining equal part of my residuary estate shall be thereafter held by my son, Sona Veena Viswanathan Chettiar in trust for my grandson by the said Sona Veena Viswanathan Chettiar for a period of 16 years from my death and that after the said period of 16 years from my death my said trustees shall distribute the said remaining half of my residuary estate amongst my male grandsons by the said Sona Veena Viswanathan Chettiar who may be living at such time in equal shares.
2. On the death of Chockalinga Chettiar, the executors took charge of the estate. The will was duly proved and letters of administration with will annexed was granted by the Malaya Court to the attorney of the executors. The executors paid Meenakshi Achi the Rs. 20,000 within the period prescribed by the will. The payment was made during the year of account. The properties in Malaya were acquired in the name of Chockalinga himself. He was originally assessed to tax as an individual. But during the assessment year 1939-40, the assessee admitted that, his status was that of a Hindu undivided family, and submitted subsequent returns in his capacity as karta thereof. In response to a notice under Section 22(2), Veerappa and Viswanathan submitted a return for the assessment year 1951-52 in their capacity as trustees of the estate of Chockalinga : they claimed that they should be assessed in their representative capacity under Section 41 in two shares on the ground, that the shares had vested in the residuary legatees, that the income derived from the two gardens in Johore Bahru should be excluded from the assessment, as the properties which stood in their respective names were not part of the estate of the deceased, and that a deduccion should be allowed in respect of the sum of Rs. 20,000, paid to Meenakshi Achi during the year of account. The Income-tax Officer held that, having regard to the changes of the status accepted by Chockalingam Chettiar in 1939-40, the status of the assessee was that of a Hindu undivided family, and that the estate of the deceased should be assessed on that footing. The two gardens in Johore Bahru were held part of the joint family assets not being the exclusive or separate properties of the sons, and the income therefrom was included in the assessments. The claim for deduction in respect of Rs. 20,000 was negatived on the ground that it was not a charge on the income. The Appellate Assistant Commissioner was of the view that the status of the assessee would be that of a Hindu undivided family till at least three years after the death of Chockalinga, the period of distribution specified in the will. He confirmed the assessment made by the Income-tax Officer. On further appeal, the Tribunal negatived the claim of the assessee to be assessed under Section 41, as it held that the will of Chockalinga being that of a member of Hindu coparcenary with regard to joint family property was invalid, and that Veerappa and Viswanatha were liable to be assessed as a Hindu undivided family. The Tribunal further affirmed. the view of the officers of the department that the income from the two gardens should be included and that the payment made to Meenakshi Achi could not be deducted from the assessable income.
3. The following questions were, thereupon, referred for our opinion under Section 66(1) of the Indian Income-tax Act:
1. The assessee being a Hindu undivided familyfis Section 41 of the Income-tax Act applicable to assessment of the income arising from the two gardens in Johore Bahru aforesaid?
2. Gould the payment of Rs. 20,000 to Meenakshi be excluded from the computation of the income of the assessee family of the year of account having regard to the terms of the will?
3. It is obvious that Question No. 1 has not been correctly framed. It comprises of two parts, namely, (1) the validity of the assessment on the footing that the assessee was a Hindu undivided family; and (2) the propriety of the inclusion of the income from the two gardens in Johore Bahru. In order to bring out the real points that arise in the Reference, it is necessary to recast the questions. The questions that arise are :--(1) Whether the assessment on the estate of late VR. RM.S. Chockalingam Chettiar by S. VR.. Veerappa Ghcttiar and S.V. Viswanathan Chettiar was validly made in the status as Hindu undivided family; (2) whether the assessee is liable to be assessed under Section 41 of the Income-tax Act; (3) Whether the income arising from the two gardens in Johore Bahru would be liable to be included in the assessment; and (4) is the payment of Rs. 20,000 to Meenakshi Achi liable to be excluded from the computation of the Income?
4. Question No. 1 : The name of the assessee in the assessment proceedings is given as the estate of Chockalingam Chettiar by Veerappa Chettiar and Viswanathan Chettiar. At the same time, the status of the assessee is described as Hindu undivided family. If the assessee is a Hindu undivided family, it is difficult to conceive how there could be any assessment of the estate of a deceased member of that family. In Meenakshi Achi v. Ramaswami Chettiar : AIR1939Mad552 , it was held that a suit for administration of the estate of a person who died a member of joint Hindu family could not be maintained, unless, the deceased left separate property (which would be his estate). The reason is that under the Mithakshara law, the member's interest in the family property devolves by survivorship on his death, in favour of the other coparceners. In Attorney-General of Ceylon v. Arunachalam Chettiar L.R. (1957) A.C. 513, it was held that, where one of two coparceners in a Hindu undivided family died, his interest would not amount to a property which would pass on his death in favour of his survivor, and. that his share was not liable to the estate duty in the hands of the survivor under the Estates Duty Ordinance of Ceylon. It follows that, if Chockalinga died, a member of a Hindu undivided family, there would be no estate left by him in the absence of any separate property of his, and there could be no valid assessment of the estate as such. Thus, if the assessment is of the estate of the deceased in the hands of the executors under the will, no question of assessment as a Hindu undivided family could arise. If, on the other hand, the assessment is on the survivors or successors directly, it may be that they hold the property as members of a Hindu undivided family, and be liable to be assessed as such.
5. We shall, next, consider whether the properties in Johore Bahru could be testamentarily disposed of by Chockalinga, so that the title of the executors could only be under the will. It is conceded that the law of Johore Bahru does not recognise a joint Hindu family as a unit which could own property. Under the law, it would be competent for an acquirer of property to dispose of it as his own property.
6. Therefore, it would be competent for Ghockalinga to dispose of his properties by a will. The validity of a disposition of immovable property has to be considered only according to the law of the country (that is, lex loci or lex situs) where the property is situate. Dicey states in his work on the Conflict of Laws (17th Edition) at page 512:
Rule 85. All rights over, or in relation to, an immovable (land) are (subject to the exceptions hereinafter mentioned) governed by the law of the country where the immovable is situate (lex situs.)
The learned author states that, as a general rule, all questions that arise concerning rights over immovoables (land) are governed by the law of the place where the immovable is situate (lex situs) and that this principle applies to rights of every description. Further at page 514, it is stated:
A person's capacity to alienate an immovable by sale or mortgage inter vivos or to devise an immovable, is governed by the lex situs. The lex situs means, for an English Court dealing with land in England, English domestic law, and means, for an English Court dealing with land abroad, whatever system of domestic law the lex situs would apply.
7. It is well settled that the persons entitled to succeed to immovable property belonging to an intestate are determined by the law of the land where the property is situate, namely, lex situs or lex loci. Similarly, in regard to testamentary disposition, the validity of a will, disposing of immovable property would be determined with reference to the capacity, formalities and material essential validity by the lex loci mi sitae? (Vide: 7 Halsbury, Simonds Edition 51). The law on this point is stated by Cheshire in his book on Private International Law (5th Edition) at page 571:
Accordingly, where the owner of immovables dies intestate, the order of descent or distribution prescribed by the lex situs is applied by the English Court no matter what his domicil may have been...
With regard to wills of immovables the rule of common law is that it is the lex situs, and the lex situ? exclusively, which decides whether the testator has capacity, whether the appropriate formalities for the making or for revocation of a will have been observed, whether the testator has disposition and whether the interest devised is essentially valid. The law of the testator's domicil has no effect upon these matters, whether the subject-matter of the will is a freehold or a leasehold interest.
8. In the present case, the Tribunal has held that the grant of letters of administration with will annexed in Malaya in respect of the properties in Malaya would hold good to that extent. The validity of a testamentary disposition in regard to immovable properties situate in a foreign country is a question relating to foreign law. Such a question would be a question of fact, and in view of the conclusion of the Tribunal that under the law in Malaya the letters of administration granted would be valid, no question either of the validity of the will or of the rights of the Hindu undivided family over the properties disposed of can at all arise.
9. The learned Counsel for the department relied on the decision of the Privy Council in Nalaraja Filial v. Subbaroya Chetliar (1950) 1 M.L.J. 172 : L.R. 77 IndAp 33 : I.L.R. (1950) Mad. 862 (P.C.). In that case, a Hindu widow domiciled in Pondicherry in French India who had properties in British India as well, adopted a son, which adoption according to the French Law, could be done without the consent of sapindas. A question arose whether the adopted son would be entitled to the immovable properties in the then British India, which did not recognise an adoption by a widow without the authority of her sapindas. The Privy Council held that the adopted son would be entitled to the properties in British India as well, even though such adoption would not have been valid in the British India. The question to be decided in that case did not concern itself with the transfer of property in a foreign country. Adoption is a question of status. That had to be decided with reference to the law of domicile, namely, the French Law. Once the status was established it followed that the adopted son would become entitled to all the rights which would accrue to him by virtue of that status. It cannot be said, therefore that the Privy Council recognised any principle contrary to the accepted one under the International Law, namely, that succession to or a disposition of a property situate in a foreign country could be determined by the lex loci or lex situs. Therefore, the validity of Chockalingam's will will have to be decided by the law in Malaya, and it is conceded that under that law it would be void. The two sons have accepted office as executors, and it would not be open to them even to assert a title contrary to the will. As Ghockalinga would have the capacity to dispose of the properties standing in his name in Malaya, the dispositions in the will should be held to be valid. That apart, it is now well settled that a member of a joint family could dispose of his interest in the family properties by a will, provided all the other members assent to it. Such a disposition has been upheld as a family arrangement. In the present case, no member of the family has repudiated the will. It would not be open to the Department, in these circumstances, to declare the will void, and proceed to assess as if the properties belonged to the Hindu undivided family. The assessment should, therefore, have been made as if the properties belonged to the estate of Ghockalinga in the hands of his representatives. Question No. i will, therefore, be answered in the negative.
10. Question Mo. 2 : In order that Section 41 of the Income-tax Act might apply, the income should have been received by the executors in their capacity as trustees of the legatees and not in their own capacity as executors. Mr. Rama Rao Sahib contended that, on the terms of the will, the executors would have to function as such for 3 years after the death of the testator, and it was only thereafter that they could be held to have completed administration and held the properties as trustees. We cannot agree. Clause (3)(a) relates only to the division of the property, and cannot be held to postpone the administration or the vesting of the property in the legatees. The presumption of law is in favour of early vesting. The disposition in favour of Meenakshi (the only specific legacy) shows that the testator intended an earlier administration. It cannot, therefore, be inferred that the executors necessarily continued in office till 18th April, 1952. But it has still to be ascertained when the executors ceased to function as such and became trustees of the residuary legatees. Under the will, the residue could be ascertained only after payment of the legacy, to Meenakshi Achi, the payment of the debts, other legacies, funeral and testamentary expenses. The legacy of Meenakshi Achi was paid during the year of account. There are no materials on record to show whether the administration of the estate had been otherwise complete by then or whether the executors have assented to the vesting of the residue m the residuary legatees. Section 41 of the Indian Income-tax Act would come into play only when the executors have completed their executorial functions and became trustees for the persons beneficially entitled under the will. The will appoints Veerappa and Viswanathan both as executors and trustees. They imply two distinct capacities. In Lord Brougham v. Lord William Poulett (1895) 52 E.R. 294 : 19 Beav. 119, Sir John Romilly, M.R., dealing with a case where a testator had, by his will, appointed executors as his trustees, observed at pages 133 and 134:
Their characters are frequently, as they are in this will, united in the same persons, but they are in themselves distinct, and the executorial character, which begins at the death of the testator, may merge into the character of trustee, which begins at a later period, and for the most part, when the executorial duties relative to the trust fund have ceased. This distinction is a very familiar one. For the most part, the cxcculorial duties consist in ascertaining the proper nett amount of the various parts of the testator's property, after payment of debts and expenses, and distributing them amongst the persons entitled: these persons may be trustees who hold it in trust for others, and they themselves may be, and frequently are, the trustees who receive or retain, as trustees, the fund ascertained by themselves as executors.
11. The office of an executor is distinct from that of a trustee, though in some sense he may be a trustee or accountable as trustee. So long as he is an executor, he holds the property of the deceased in his own right, as his legal representative and not on behalf of the beneficiaries. He would continue to hold in that capacity till the estate is cleared by the payments, of debts, testamentary expenses and specific legacies. In other words, after clearing the debts and paying the funeral and testamentary expenses, the specific legacies have to be paid and the surplus ascertained, and then when there is assent to the vesting of the residue, the executor would be held to have shed his character as executor and would hold the property as a trustee for the legatees, etc. In Taran Singh Hazari v. Ramratatl Tawari I.L.R. (1904) Cal. 89, the learned Judges observed at pages 92 and 93:
The position and duties of an executor in this country are not very well understood, and considerable confusion exists as to duties of the executor in administering the estate. The duties of the executor are to administer the estate of the deceased only so far and so long as to enable him to carry out the terms of the will of which he is executor. After the property has ceased to be the estate of the deceased and has become the property of the residuary legatee under the will, the executor as such has no authority to manage the estate on his behalf.
12. Sections 333 and 336 of the Indian Succession Act declare that the title of a legatee is completed only by the assent of the executor. Therefore, till the estate has been administered by payment of the debts of the deceased, the testamentary and funeral expenses and of specific legacies and till there has been an assent to the vesting of the residue, the office of executor would subsist. It is only after completing the administration in the manner stated above that the executor will become a trustee for the beneficiaries in regard to the undistributed properties. In Raghavalu Naldu v. Commissioner of Income-tax' I.L.R. (1904) Cal. 89, Viswanatha Sastri, J., stated the position thus at page 807:
The question in each case is, has the administration reached a point at which you can infer that the administration has been completed, the residuary estate has been ascertained, the bequest of the residue has been assented to and the residuary estate therefore became vested in trustees, be they the executors, themselves or strangers. In other words, can it be said that the residuary estate had taken concrete shape and could and should have been handed over by the executors to the persons beneficially entitled but for the fact that the estate is settled in trust and vested in the executors as trustees?
13. The important point to consider is whether the administration of the estate by the executors in the present case has been completed. If such administration has not been completed, the executors would have been in receipt of the income only in their capacity as executors and they would be liable to be assessed only as executors, that is, as one unit. If, on the other hand, the executors had completed the administration before the year of account, and assented to the legacies including the residuary legacy, they would be in receipt of rents only in their capacity as trustee, and the provisions of Section 41 of the Indian Income-tax Act would apply to the assessment. As we stated before, the payment of legacy to Meenakshi Achi was made only during the year of account. Therefore, there is no question of the executors being trustees earlier than when the legatee was completely paid off. Even then the further question which has got to be considered is, whether the administration was otherwise complete during the year of account, and if so, when? If that date is ascertained, the executors would be liable to be assessed as one unit until then. Thereafter they could be assessed as trustees indirectly under Section 41 with an option in the Department to assess the beneficiaries. We, therefore, answer the 2nd question in this manner, namely, that Section 41 of the Indian Income-tax Act would not apply to the assessment, unless it were shown that the executors had discharged themselves from their position as executors and began functioning as trustees for the beneficiaries under the settlement.
14. Question No. 3--As regards the two gardens standing in the names of Veerappa and Viswanathan, the finding of fact arrived at by the Tribunal is that they were purchased out of the monies supplied by Ghockalinga. The will purports to bequeath all the properties of Ghockalinga. Therefore, even if these two gardens had not been specifically referred to in the will or in the letters of administration which was granted, they should be held to have been disposed of by the will and the income therefrom would have to be treated as income of the estate of the deceased. Question No. 3, is therefore, answered in the affimative.
15. Question Mo. 4 :--Payment to Meenakshi Achi was directed to be made out of the assets left by the deceased. It cannot, therefore, be of revenue, in nature. That amount could not, therefore, be excluded from the assessable income. The question is answered in the negative. In the circumstances of the case we make no order as to costs.