DERBYSHIRE, C.J. - This is a Reference under Section 66 (1) and 66 (2) of the Indian Income Tax Act, XI of 1922, by the commissioner of Income Tax. The matter arises out of an assessment of tax in the year 1933-34 on the income of the accounting year ending 31st March, 1933, of Messrs. P. C. Mullick and D. C. Aich who are the executors of the estate of Akshoy Kumar Ghose and are the assessees here.
The facts are set out in the Reference itself. Akshoy Kumar Ghose died in October 1931. Under his will Akshoy directed in paragraph 1 :-
'After my death if I have any debts my said executors (executors) and trustees shall pay up the same out of the income of my property and on the occasion of my Addya Shradh they shall pay Rs. 10,000, ten thousand Rupees, out of the income of my property for expenses in connection with the Addya Shradh to the person who will be entitled to perform the Sradh'.
In paragraph 2 he directed :-
'My said executors and trustees shall pay out of the income of my property, the costs of taking out probate of this last instrument of will and of (administration) of my property'.
Question 1 asks :-
'Whether or not in computing the chargeable income the whole of the amount (Rs. 10,000) provided in the will of Akshoy Kumar Ghose as payable out of income on account of his sradh, should have been left out of calculation, and not merely the actual amount paid in the year of assessment on account of the same (Rs. 5,537) ?'
That is a question referred by the Commissioner at the instance of the trustees. The Commissioner himself has referred another question to us under Section 66 (1) and it is this :-
'Whether in computing the income chargeable to tax in this case, the Income Tax Officer should, on a proper application of the law, have excluded no part of the sum of Rs. 10,000 ?'
It is claimed by the excutors that no part of the Rs. 10,000 directed to be paid to the person entitled to perform the sradh is chargeable to income tax. The Commissioner has allowed, that is to say, exempted from taxation a sum of Rs. 5,537 which was the sum actually expended on the Addya Sradh of the deceased. The Addya Sradh ceremony is performed as a rule about one month after the death of the deceased. It is an act of piety and devotion on the part of the person who performs it. It may be, although personally I have some doubt, that expenses of the performance of this Addya Sradh, i.e., the first sradh after the death of the testator, are part of the necessary funeral ceremonies contemplated by Section 316 of the Indian Succession Act. As I have said, I have some doubt whether it is one of the necessary funeral ceremonies, because it takes place some time after. If it is, then according to Section 316 of the Indian Succession Act it is the duty of an executor to provide funds for the performance of the necessary funeral ceremonies of the deceased in a manner suitable to his condition, if he has left property sufficient for the purpose. Section 320 of the Succession Act says :-
'Funeral expenses to a reasonable amount, according to the degree and quality of the deceased, and death bed charges, including fees for medical attendance, and board and lodging for one month previous to his death, shall be paid before all debts'.
If the expenses of Addya Sradh are part of the necessary funeral ceremonies of the deceased, then the expenses actually incurred, reasonable, proper and suitable to the condition in life of the deceased, would be payable by the executors, out of the general estate of the deceased. In this case however the deceased has been careful to direct his executors and trustees to pay Rs. 10,000 for the expenses is connection with the Addya Sradh to the person who would be entitled to perform the Sradh out of the income of his property. The testator seems to have been very careful and very anxious that no encroachment should be made on the corpus.
The case of Trustees of The Sir Currimbhoy Ebrahim Baronetcy Trust v. Commissioner of Income Tax, Bombay, is in point. The judgment of the Privy Council in that case was delivered by SIR SIDNEY ROWLATT and he reviewed the Indian Income Tax Act, 1922, and pointed out : 'By Section 2 of that Act assessee is defined as meaning a person by whom income-tax is payable and person by virtue of the General Clauses Act, 1897, Section 3, sub-section 39, 'includes any company or association or body of individuals, whether incorporated or not'. Section 3, as amended, is as follows :-
'Where any Act of the Indian Legislature enacts that income-tax shall be charged for any year at any rate or rates applicable to the total income of an assessee, tax at that rate or those rates shall be charges for that year in accordance with, and subject to the provisions of this Act in respect of all income, profits and gains of the previous year of every individual, Hindu undivided family, company, firm and other association of individuals'.
In that case the trustees of the Baronetcy Trust were assessed. We are told that the income of the trust for the year 1928-29 consisted in part of interest from securities and in part of rents; about 75 per cent. of it was paid to the Baronet, about 10 per cent. was carried to the two funds, and the remainder was absorbed by rates, taxes and other outgoings. It was held that the incorporated trustees were assessable under the Indian Income Tax Act, 1922, to income-tax and super-tax for 1929-30 upon the whole income of the trust. In my view, in the same way, here the executors and trustees of the will of Akshoy Kumar Ghose are assessable for the whole of their income notwithstanding that a portion of it was directed by the will to be paid to the person who would perform the Sradh ceremony; in other words, no deduction for the money directed to be spent on Sradh ceremony was allowable according to law. That answers question 1 and the supplementary question which the Commissioner of Income Tax has asked.
The second question is :
'Whether or not the cost of obtaining probate of the will of Akshoy Kumar Ghose should have been excluded from the chargeable income of the assessees, particularly in view of the express provisions in the will that the same shall be payable out of the income
Here, again, the testator was careful about the corpus of the property and directed that the executors and trustees should pay out of the income of his property the cost of probate. According to Section 321 of the Succession Act, the expenses of obtaining probate or letters of administration, including the costs incurred for or in respect of any judicial proceedings that may be necessary for administering the estate, shall be paid next after funeral expenses and death-bed charges, so that the cost of probate normally will be payable out of the general fund of the estate. In my view no deduction should be allowed on the chargeable income in respect of the cost of obtaining probate of the will of Akshoy Kumar Ghose. The income of the trustees is, as I have pointed out when dealing with question 1, taxable and no deduction should be made for the costs of obtaining probate.
Before leaving this part of the case, I ought to deal with an argument put forward by Mr. Biswas in the case of Raja Bejoy Singh Dudhuria v. Commissioner of Income Tax, Bengal. That was a case where the assessee claimed that he was not assessable on the whole of his normal income, because that income had been charged by the Court with a payment of a portion of it to his step-mother. Their Lordships of the Privy Council held that the assessee was only chargeable upon the balance of the income left after deducting the income which was payable to this step-mother. That case is different from this case. The difference is illustrated by a passage in the judgment of LORD MACMILLAN at page 200. It reads :-
'When the Act by Section 3 subjects to charge all income of an individual, it is what reaches the individual as income which it is intended to charge. In the present case the decree of the Court by charging the appellants whole resources with a specific payment to his step-mother has to that extent diverted his income from him and has directed it to his step-mother; to that extent what he receives for her is not his income. It is not a case of the application by the appellant of part of his income in a particular way; it is rather the allocation of a sum out of his revenue before it becomes income in his hands'.
In the circumstances out of which question 1 and 2 arise it is not the allocation of a sum out of the revenue before it becomes income in the hands of the trustees but it is a case of the application by the trustees under the directions of the testator of a part of the income in their hands in a particular way.
As regards question 3, it is as follows :-
'Whether or not the assessees were entitled to credit for the full amount of deductions of tax at source on account of securities and dividends, without any abatement in respect of the proportionate amount of charges allocated to and allowed against the total receipts from such sources ?'
The Commissioner says :-
'This question is referred in accordance with the assessees wishes, though it possibly is the result of some confusion in the mind of the assessee regarding the facts involved in the assessment which are set out clearly below'.
Mr. Biswas has dealt with the facts that underlie this question at some length. The question, however, is one of fact it may be a little involved, but nevertheless it is a question of fact and not one which ought to have been put to us. We, therefore, do not answer question 3.
The Income tax Department will have the costs of this Reference.
COSTELLO, J. - I agree in regard to the answers which have been given to the first question and to the second question which have been propounded for our consideration in the statement of the case made by the learned Commissioner of Income tax.
As regards the third question, the Commissioner himself has stated that that is referred in accordance with the assessees wishes, though it possibly is the result of some confusion in the mind of the assessees regarding the facts involved in the assessment. The learned Commissioner has set out the facts upon which the question is purported to be based and in paragraph 8 of his statement of the case he says :-
'The expression charges used in paragraph 7 above is perhaps misleading and I should perhaps make it clear that out of the total income of the estate amounting to Rs. 1,56,701 income totalling Rs. 58,994 did not, under the provisions of the will, find its way to the executors for being dealt with as their income and accordingly they have not been made liable to tax therefor. This sum was utilised in some other manner in accordance with directions of the will and in so far as the assessment under dispute is concerned, it is no part thereof. Both the Income Tax Officer and Assistant Commissioner proceeded in the following manner : They treated this sum of Rs. 58,994 as no part of the income of the assessee at all. Thus from the total income of the Estate amounting to Rs. 1,56,701 they deducted this sum of Rs. 58,994 and found Rs. 97,707 to be the total income of the assessee from all the sources including agricultural sources and as the sum of Rs. 58,994 was not payable out of any particular source, it was reasonably treated as being drawn from all sources proportionately and thus the income of the assessee under the different heads was calculated as follows :'
and the Commissioner then has set out the manner in which the income was calculated.
It seems to me perfectly clear upon the facts stated by the learned Commissioner of Income Tax that the assessees as regards this sum of Rs. 58,994 have no cause of complaint in connection with the assessment with which we are now concerned. It was not taken into account. If income-tax has been deducted at source in respect of it, that is a matter which falls to be considered and dealt with, if necessary, under the relevant provisions of the Income tax Act for making a refund. Certainly it does not fall to be considered in connection with the assessment with which we are immediately concerned. I agree, therefore, that the learned Commissioner was correct in saying, as he said inferentially at any rate, that question 3 was not a matter which ought to have come before us at all.
With regard to the other two questions it is clear that Mr. Biswas appearing on behalf of the assessees had admitted that generally speaking executors are liable for income-tax in respect of the income which finds its way into their hands in their capacity as executors and, were any authority needed for that proposition, it is only necessary to refer to the judgment of JENKINS, C.J., in is case of A. H. Forbes v. The Secretary of State for India in council. In considering this matter, therefore, we may start with the basic proposition that prima facie the assessees are liable to pay tax on all the income of the testator which comes into their hands. Mr. Biswas sought to argue. however, as regards the first question that it was not only the sum of Rs. 5,537 that should be allowed as a deductible allowance but the whole of the sum of Rs. 10,000 which had been directed by the testator to be paid out of his income for expenses in connection with his Addya Shradh should have been deducted and treated as an allowance. As regards the second question Mr. Biswas also argued that the whole of the cost of obtaining probate of the will of the testator should have been excluded from the chargeable income of the assessees.
Mr. Biswas based his contention upon the principle underlying the decision in the case of Raja Bejoy Singh Dudhuria v. Commissioner of Income tax, Calcutta. The principle in that case appears to be this : If there is an allocation of a sum of money out of the revenue of an individual or, as in the present case as Mr. Biswas argued, out of the revenue of the executors, before that sum becomes 'income' either in the hands of the individual or in the hands of the executors, then in that event the sum in question must be treated as being no part at all of the chargeable income of the assessee. In Dudhurias case RANKIN, C.J., when the case was before this Court, with the concurrence of Mr. Justice C. C. GHOSE and Mr. Justice BUCKLAND dealt with the matter upon the footing that by the decree which this Court had made the Appellants step-mother had a charge not only on the Appellants zemindari property from which his agricultural income was derived but also on all his other sources of income including the assessable income. The learned Chief Justice rejected the suggestion that the Appellants liability to his step-mother was of the same kind as his liability to provide for his wives and daughter and he stated that the position was the same as if the appellant had received his various properties, securities and businesses under a bequest from his father upon the terms that these assets were charged with an annuity for the maintenance of the widow. The learned Chief Justice was of opinion that the case was not one of a charge created by the Raja for the payment of the debts which he had voluntarily incurred. In that view of the matter their Lordships of the Privy Council agreed and said that that was the correct approach to the question they had to determine. They then pointed out that SIR GEORGE RANKIN next examined the various exemptions and allowances conceded in Sections 7 to 12 of the several heads of income, profits and gains which were chargeable to income-tax under Section 6. They further pointed out that the learned Chief Justice had reached the conclusion that the appellants liability to his step-mother did not fall within any of those exemptions or allowances. With that conclusion their Lordships of the Privy Council were in agreement. But as LORD MACMILLAN (at page 200 of report) states their Lordships did not agree with the learned Chief Justice in his rejection of the view that the sum paid by the appellant to his step-mother was not 'income' of the appellant at all, and LORD MACMILLAN said, 'This is their Lordships opinion is the true view of the matter'. It follows, therefore, that the ratio decidendi of Dudhurias case was that the sum which the Raja had been ordered to pay to his step-mother was to be treated as not being part of the Rajas own income at all.
Mr. Biswas has invited us to come to the conclusion that both sum of Rs. 10,000 directed in the will to be paid for the expenses of the shradh and the cost of obtaining probate of the will of Akshoy Kumar Ghosh ought to be regarded as never having been part of the income of the assessees at all and, therefore, outside the reach of the income-tax authorities in connection with the assessment made upon the executors of Akshoy Kumar Ghosh. I agree with my Lord the Chief Justice in thinking that that is not a correct view of the matter. Normally, no doubt, executors under a will be entitled under Section 316 of the Indian Succession Act (XXXIX of 1925) to expend such an amount as will be reasonably necessary for the performance of the funeral ceremonies of the deceased in a manner suitable to his condition, provided of course he has left property sufficient for the purpose. In my view the Addya Shradh may not unreasonably be considered as an integral part of the necessary funeral ceremony of the deceased. Therefore apart altogether from the express provisions in the will, Akshoy Kumar Ghoshs executors would have been entitled to provide funds for the performance of that ceremony under the provisions of section 316 of the Indian Succession Act. The provisions in the Indian Succession Act are obviously based on the early English common Law. They are attributable to the principle which have been laid down in various cases by the courts in England. In connection with this particular point I should like to refer to the case of Mullick v. Mullick which was a case which went on appeal to the Privy Council from an order of the Supreme Court of Judicature at Fort William in Bengal in the year 1829. It is reported in 1 Knapps Privy Council Reports, 245, and it is interesting to observe that LORD WYNFORD in the opening passage of the judgment given by the Judicial Committee of the Privy Council, said this :-
'The interest of Sovereigns, as well as their duty, will ever incline them to secure, as far as it is in their power, the happiness of those who live under their Government; and no person can be happy whose religious feelings are not respected. If this were a case between Europeans and Hindus, we would not take a step without the assistance of some of the persons from India, who are acquainted with the usages of that country with regard to the ceremonies that ought to be observed, and the works that ought to be performed on the death of an opulent native; for we should fear, lest by the judgment which we might advise his Majesty to pronounce, the feelings of the people of Hindustan might be wounded'.
Then their Lordships went on to say :
'But this is a case where some members of a Hindu family object to the allowance that has been made to other members of the same family for the expenses of the obsequies of the father of all the litigant parties, and of the works which that father by his will directed to be done by those to whom he bequeathed his fortune. With respect to the obsequies, as the will gives no directions how they are to be performed, we have only to consider upon the evidence which these parties have laid before us whether the sums allowed for their performance are more than have usually been expended at the funerals of persons of the same rank and fortune as the deceased. If they are more, as members of the family object to them, we ought not to sanction the expenditure'.
Then his Lordship proceeded to consider whether or not the expenditure incurred ought to be allowed. That case indicates, as indeed does Section 316 itself, that apart from any provisions in the Will, it is the duty of the executors to provide funds for the performance of the necessary funeral ceremonies of the deceased. But those expenses in normal circumstances would have come out of the estate of the testator and they would be a charge on the corpus rather than on the income. In the present instance Akshoy Kumar Ghose gives definite and express direction that :-
'My said executors and trustees shall. . . on the occasion of my Addya Sradh pay Rs. 10,000 out of the income of my property for expenses in connection with the Addya Sradh to the person who will be entitled to perform the Sradh';
and (in the next paragraph),
'My said executors and trustees shall pay out of the income of my property, the costs of taking out probate of this last instrument of will and of administration of my property'.
It seems to me - bearing in mind the observation of LORD MACMILLAN in the passage at the foot of page 200 in the report of the Dudhuria case - that this is a case of the allocation by the testator of a part of the income to be used in a particular way. It follows, therefore, that there was income coming into the hands of the executors, the present assessees, in such a manner that it became chargeable to tax before any part of that income was expended by the executors either for the purpose of discharging the cost of probate or for the purpose of providing expense for the performance of the Addya Shradh ceremony of the deceased.
With regard to the first question, therefore, taking it in conjunction with the question which the learned Commissioner of Income-tax himself has referred under Section 66 (1), I would say that upon a proper construction of the Will the Income-tax Officer ought not to have excluded any part of the sum of Rs. 10,000.
As regards the second question, I would say that the costs of obtaining probate of Akshoy Kumar Ghoshs will should not be excluded from the chargeable income of the assessees.
Reference answered accordingly.