Full Judgment Text
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PETITIONER:
K.R. PATEL (DEAD) THROUGH L.RS
Vs.
RESPONDENT:
COMMISSIONER OF INCOME TAX
DATE OF JUDGMENT: 27/08/1999
BENCH:
D.P.Wadhwa, M.B.Shah
JUDGMENT:
D.P. Wadhwa, J.
A Division Bench of the High Court of Judicature at
Bombay on a reference under Section 256(1) of the Income-tax
Act, 1961 (for short the ’Act’) decided all the three
questions of law referred to it for its opinion by the
Income Tax Appellate Tribunal (’Appellate Tribunal’ for
short) in favour of the revenue. The assessee is aggrieved.
The questions of law are:-
"1. Whether, on the facts and in the circumstances of
the case, K.R. Patel and B.G. Amin held the properties as
trustees from the time of the death of Bhikhubai Chandulal,
or whether they held the estate in that capacity from April
5, 1963, when probate of the will was obtained?
2. Whether, on the facts and in the circumstances of
the case, K.R. Patel and B.G. Amin received income of
certain part of the estate as executors and income of the
remaining part of the estate as trustees?
3. Whether, on the facts and in the circumstances of
the case, K.R. Patel and B.G. Amin were liable to be
assessed as trustees under section 161 of the Income-tax
Act, 1961?"
These questions arose from the order of the Appellate
Tribunal in the following circumstances.
One Mrs. Bhikubai Chandulal Jalundhwala, a resident
of Bombay, executed a will on January 5, 1962. She died
three days after on January 8, 1962. During her life time
she was possessed of considerable properties both movable
and immovable. K.R. Patel, the appellant, and B.G. Amin,
solicitor, since dead, were appointed as executors and
trustees under the will. The executors and trustees under
the will were directed first to pay all the debts, funeral,
death and other testamentary expenses, estate duty,
Government dues as soon as possible. Two immovable
properties under the will were bequeathed to two different
individuals. It was provided in the will that the executors
and trustees should convey these immovable properties after
obtaining probate of the will and until this was done to
deal with the rents and income arising therefrom in the same
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manner as of other estate. The will also recited that the
testator had during her life time gifted her one immovable
property to K.R. Patel and under the will she provided for
payment to him Rs.40,000/- for him to construct a floor on
the said property. Testator also devised payment to each of
her employees amounting to their respective six months
salary.
Then the executors and trustees were directed under
the will to wind up the business of the testator which she
was running in the name of Karamchand Ambalal & Co. or to
sell the same as a going concern. Clauses 11, 15, 16 and 20
of the will are particularly relevant for purposes of this
appeal and are as under:-
"11. I direct that except as to the parts of my
estate and properties which are bequeathed specifically by
this my will or are otherwise disposed of by me prior to my
death my executors and trustees shall convert all my
moveable and immovable properties into cash.
15. I direct that my executors and trustees of this
my will shall convey to the respective legatees of my
aforesaid immovable properties after obtaining probate of
this my will and until such properties are transferred to
the names of the respective legatees the rents or income
arising therefrom shall be collected by my executors and
trustees and shall be dealt with by my trustees in the same
manner as my other estate.
16. After my executors and trustees have sold my
other remaining properties both movable and immovable (and
have converted the same into cash) my executors and trustees
shall stand possessed of the same and the same shall be
dealt with by them as hereunder provided. I direct that my
executors and trustees shall sell all the shares and
securities of which I may be possessed of at the time of my
death. I also direct that my executors and trustees shall
realise all my investments whatsoever made and shall convert
the same into cash.
20. As to the entire residue of the amount lying with
my executors and trustees I direct that my said executors
and trustees shall use the same for providing educational
and medical aid to the needy at their absolute discretion
and in such manner as my said executors and trustees may
deem fit. I direct that in furtherance of and for giving
effect to the provisions of this clause my executors and
trustees shall donate such amount or amounts to such
educational institution, university or hospital authorities
or maternity homes on such terms and conditions as may
appear to be just and necessary and which in their absolute
discretion they may think proper. My executors and trustees
shall also be entitled to use such part or parts of said
money for the benefit of and for providing aid to such
religious institution or institutions as they may in their
absolute discretion think fit."
The executors and trustees filed estate duty return in
July, 1962 disclosing total value of the estate as Rs.19
lakhs. Assessment was completed on March 17, 1963 on a
total value of the estate of Rs.24 lakhs. The estate duty
amounting to little over Rs.4.57 lakhs was paid on March 28,
1963. Probate of the will was granted on April 5, 1963.
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Immovable properties mentioned in the will were transferred
in October, 1963 and February, 1964. By February, 1964 all
the payments as devised by the will were made to respective
legatees.
On June 19, 1963 an application was filed by the
executors and trustees under Section 18 of the Bombay Public
Trust Act, 1950 for registration of the public trust created
under the will. The application was filed under protest.
It was contended that it was not a case of creation of a
trust under the will but was a case of assignment of power
to deal with estate in the manner indicated in the will.
However, it was held that the trust properties vested in the
two executors and trustees as trustees under the terms of
the will as well as under Section 211(1) of the Indian
Succession Act, 1925. It was also held that the trust was
public trust. The trust was registered on December 29,
1964.
Executors and trustees filed income-tax return for the
Assessment Year 1964-65 for the previous year (October 20,
1962 to October 17, 1963) on February 13, 1965. Return was
signed as executors of the will. Before the Income-tax
Officer it was contended that the income-tax return was
assessable in the hands of the executors and trustees as
trustees and not as executors and that since the properties
left behind by the testator were held under trust for whole
charitable and religious purposes its income was exempt from
tax under Section 11(1) of the Act. Various other
contentions were raised but all these were rejected by the
Income- tax Officer who assessed the income in the hands of
the executors and trustees as executors.
Against order of the Income-Tax Officer appeal was
filed before the Appellate Assistant Commissioner, who also
held that the executors and trustees were liable to be
assessed in the capacity of executors inasmuch as the
administration of the estate had not been completed. The
matter was then taken to the Appellate Tribunal. By order
dated July 16, 1971 the Appellate Tribunal held that the
income ought to have been assessed in the hands of the
executors and trustees as trustees and in any case the
executors and trustees had shed their characters as
executors and acquired that of trustees on April 5, 1963
when probate was granted. Appellate Tribunal further held
that even otherwise the position was that the whole estate
including the immovable properties and amount suggested to
be distributed by way of legacy had vested in the executors
and trustees as trustees and thus the income of the
immovable properties specifically bequeathed and of assets
sufficient to pay off the monetary legacies and the
outstanding estate duty would be assessable in their hands
in their capacity as executors while the income from
remaining assets would be assessable in their hands as
trustees. Appellate Tribunal accordingly directed to make
fresh assessment in the capacity as trustees.
At the instance of the revenue three questions set out
in the beginning of this judgment were referred by the
Appellate Tribunal under Section 256(1) of the Act to the
High Court for its decision. High Court answered these
question in the following manner:-
"1. K.R. Patel and B.G. Amin did not hold the
properties as trustees either from the time of the death of
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Bhikhubai or from the date on which probate of the will was
obtained.
2. During the assessment year 1964-65, K.R. Patel
and B.G. Amin received no income as trustees.
3. During the assessment year 1964-65, K.R. Patel
and B.G. Amin were not liable to be assessed as trustees."
During the assessment proceedings it appears that B.G.
Amin, one of the two executors and trustees, died and
further proceedings were carried on by the surviving trustee
K.R. Patel. During the pendency of this appeal K.R. Patel
also died. The trust had been named as Bhikhubai Chandulal
Jalundhawala Trust. After the death of K.R. Patel the
trustees were appointed by the Deputy Charity Commissioner
of the Trust, who have been impleaded as appellants.
The question that arises for consideration is if the
provisions of Section 160(1)(iv) read with Section 161(i)
would apply as contended by the assessee, or Section 168 of
the Act as held by the High Court, would apply. These
provisions are as under:-
"160.(1) For the purposes of this Act, "representative
assessee" means -
(i) .........
(ii) .........
(iii) .........
(iv) in respect of income which a trustee appointed
under a trust declared by a duly executed instrument in
writing whether testamentary or otherwise including any wakf
deed which is valid under the Mussalman Wakf Validating Act,
1913 (6 of 1913), receives or is entitled to receive on
behalf or for the benefit of any person, such trustee or
trustees;
(v) .........
Explanation 1.- A trust which is not declared by a
duly executed instrument in writing including any wakf deed
which is valid under the Mussalman Wakf Validating Act, 1913
(6 of 1913), shall be deemed, for the purposes of clause
(iv), to be a trust declared by a duly executed instrument
in writing if a statement in writing, signed by the trustee
or trustees, setting out the purpose or purposes of the
trust, particulars as to the trustee or trustees, the
beneficiary or beneficiaries and the trust property, is
forwarded to the Assessing Officer,-
(i) where the trust has been declared before the 1st
day of June, 1981, within a period of three months from that
day; and
(ii) in any other case, within three months from the
date of declaration of the trust.
Explanation 2.- For the purposes of clause (v), "oral
trust" means a trust which is not declared by a duly
executed instrument in writing including any wakf deed which
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is valid under the Mussalman Wakf Validating Act, 1913 (6 of
1913), and which is not deemed under Explanation 1 to be a
trust declared by a duly executed instrument in writing."
"161. (1) Every representative assessee, as regards
the income in respect of which he is a representative
assessee, shall be subject to the same duties,
responsibilities and liabilities as if the income were
income received by or accruing to or in favour of him
beneficially, and shall be liable to assessment in his own
name in respect of that income; but any such assessment
shall be deemed to be made upon him in his representative
capacity only, and the tax shall, subject to the other
provisions contained in this Chapter, be levied upon and
recovered from him in like manner and to the same extent as
it would be leviable upon and recoverable from the person
represented by him."
"168. (1) Subject as hereinafter provided, the income
of the estate of a deceased person shall be chargeable to
tax in the hands of the executor.-
(a) if there is only one executor, then, as if the
executor were an individual; or
(b) if there are more executors than one, then, as if
the executors were an association of persons;
and for the purposes of this Act, the executors shall
be 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.
(2) The assessment of an executor under this section
shall be made separately from any assessment that may be
made on him in respect of his own income.
(3) Separate assessments shall be made under this
section on the total income of each completed previous year
or part thereof as is included in the period from the date
of the death to the date of complete distribution to the
beneficiaries of the estate according to their several
interests.
(4) In computing the total income of any previous year
under this section, 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
shall be excluded; but the income so excluded shall be
included in the total income of the previous year of such
specific legatee."
"Executor" has been defined in the Indian Succession
Act, 1925 to mean a person to whom the execution of the last
will of a deceased person is, by the testator’s appointment,
confided (clause (c) of Section 2). "Probate" means a copy
of a will certified under the seal of a court of competent
jurisdiction with a grant of administration to the estate of
the testator (clause (f) of Section 2).
Public Trust is constituted under the Bombay Public
Trust Act, 1950. It is not disputed that in the present
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case public trust has been constituted and registered under
this Act. Public trust is defined therein under clause (13)
of Section 2 thereof. Applicability of the Bombay Public
Trust Act is again not disputed. Under Section 18 of the
Bombay Public Trust Act it shall be the duty of the trustee
of a public trust to which that Act applies to make an
application for registration of the public trust. Section
29 of applies to public trust created by will and it is as
under:-
"29. Public trust created by will.- In the case of
the public trust which is created by a will, the executor of
such will shall within one month on which the probate of the
will is granted or within six months from the date of the
testator’s death whichever is earlier make an application
for the registration in the manner provided in section 18
and the provisions of this Chapter shall mutatis mutandis
apply to the registration of such trust:
Provided that the period prescribed herein for making
an application for registration may, for sufficient cause,
be extended by the Deputy or Assistant Charity Commissioner
concerned."
There are various sections under the Bombay Public
Trust Act regarding registration of properties of the trust
both movable and immovable. These properties have to be
registered with the Charity Commissioner under that Act and
a proper register has to be maintained containing
particulars of the properties of the trust. Under Section
36 of the Bombay Public Trust Act notwithstanding anything
contained in the instrument of trust no sale of immovable
property or lease for a period exceeding three years in the
case of non-agricultural land or a building belonging to a
public trust shall be valid without the previous sanction of
the Charity Commissioner. Sanction may be accorded subject
to such conditions as the Charity Commissioner may think fit
to impose with regard to interest, benefit or protection of
the trust. It would, therefore, appear that trustees are
not free to deal with the properties of the trust even if
the will empowers them to do so. Executors and trustees
filed application for registration of the trust under the
provisions of the Bombay Public Trust Act on the directions
issued by the Assistant Charity Commissioner. They filed
the application on June 19, 1963 under protest. The trust
was registered on December 29, 1964. Non- registration of
the trust under the Act entails penalty under Section 66 of
that Act. A Division Bench of the Bombay High Court in
Chhatrapati Charitable Devasthan Trust vs. Parisa Appa
Bhoske & Ors. [AIR 1979 Bom. 218] has taken the view that
unless a trust is duly registered under Section 18 of the
Bombay Public Trusts Act read with Sections 17, 19, 20, 21
of that Act, the trust cannot be said to be registered
merely when an application under Section 18 is filed.
Registration of the trust is effected only after the order
is passed by the competent authority under Section 20 of
that Act and entries made in the register. Registration of
the trust under the Bombay Public Trust Act is certainly an
important event but in the present case registration of the
trust was after the close of the previous year and by that
date all payments devised by the will had been made to
different legatees.
If we keep the provisions of Bombay Public Trust Act
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in view it seems that under the will which appears to have
been drafted by a solicitor, well-versed with the provisions
of the Bombay Public Trust Act, the testator was very
particular that all the properties which she had not
bequeathed specifically under the will should be converted
into cash and then from the money so collected that could be
donated for charitable purposes (clause 20 of the will).
This direction of the testator under clause 20 of the will
is of great significance and understanding as to what stage
the trust comes into being. It was submitted by the learned
counsel for the appellant that in the will certain specific
bequests and liabilities were already mentioned and the
residue was ipso facto ascertainable and in its entirety
available for the trust. He said residue in clause 20 was
in fact a misnomer and that but for the specific bequests
and liabilities the whole properties of the testator were
stamped with trust. He said there was no debt to be paid
and there was no impediment, dispute or difficulty in regard
to the administration of the estate of the deceased and the
completion of the administration of the estate was a fairly
simple exercise. According to the learned counsel on
correct construction of the terms of the will the trust was
created right on the date of the death of the testator,
i.e., January 8, 1962 and in any case upon the grant of
probate to the executors-cum-trustees on April 5, 1963. He
said there was nothing to show that there was refusal or
lack of assent by the executors to the vesting of the
residuary legatee which was the trust. On the other hand he
said the assent could be inferred from the facts that the
property was valued, there was no dispute as to the
administration of the estate, and the executors-cum-
trustees applied for and obtained probate from the High
Court. In support of his submissions he referred to three
decisions of the High Courts, namely, Commissioner of
Income-Tax, Madras vs. Estate of Late Sri T.P. Ramaswami
Pillai (46 ITR 666 [Madras]), Court Receiver vs.
Commissioner of Income-Tax, Bombay City (54 ITR 189
[Bombay]) and Commissioner of Income-Tax, Tamil Nadu-I vs.
Estate of V.L. Ethiraj (By official trustee) (120 ITR 271
[Madras]).
Strong reliance has been placed by the appellant on
the decision of the Madras high Court in Commissioner of
Income-tax, Tamil Nadu vs. Estate of V.L. Ethiraj [(1979)
120 ITR 271]. In this case one Ethiraj executed his will
under which he created a trust in respect of his properties
and appointed the official trustee of Madras as the sole
executor and trustee. Ethiraj died on September 8, 1960.
Official trustee applied for the probate of the will of
Ethiraj under Section 222 of the Indian Succession Act read
with Section 7(6) of the Official Trustees Act, 1913.
Probate was granted to him on May 3, 1961. After obtaining
probate official trustee sold various properties of the
testator as directed in the will. He was to perform various
other functions. Balance of the money realised from the
estate of the testator was to be utilised in awarding
scholarships for students studying in the Ethiraj College
for Women. For the assessment year 1961-62 official trustee
was assessed under Section 168 of the Act in his capacity as
an executor. For the subsequent years 1962-63 onwards the
ITO proposed to assess the income in his hands in his
capacity as executor. Official trustee, however, claimed
that he should be assessed only as a trustee on the ground
that he was only a trustee as such the income derived by him
from the properties held for charitable purposes could not
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be assessed. He placed reliance on two decisions one of the
Madras High Court in CIT vs. Estate of late T.P. Ramaswami
Pillai [(1962) 46 ITR 666 (Mad)] and the other of Bombay
High Court in Court Receiver vs. CIT [(1964) 54 ITR 189
(Bom)]. Plea of the official trustee was negatived by the
ITO as well as by the Appellate Assistant Commissioner. He
succeeded before the Appellate Tribunal. One of the
questions which were referred to the High Court and arising
out of the order of the Appellate Tribunal was if on the
facts and circumstances of the case Appellate Tribunal was
right in holding that the properties of Ethiraj (deceased)
under his will became vested in the official trustee of
Madras as a "trustee" from the very inception and,
therefore, the income of the estate was not assessable in
his hands under the provisions of Section 168 of the Act.
High Court examined the provisions of the Administrators-
General Act, 1963 and the Official Trustees Act, 1913 and
held as under:-
"It appears to be quite clear that though the official
trustee has been appointed both as sole executor and as sole
trustee, the executorship must automatically come to an end
on his obtaining the probate, that the taking out of probate
by the official trustee should be taken to be an act of
acceptance of the trusteeship and that on the date of the
obtaining of the probate the trust had come into existence
and the properties had vested in the official trustee."
High Court, however, did not agree with the Appellate
Tribunal that the properties vested in the official trustee
on the death of the deceased as trustee.
In Commissioner of Income Tax, Madras vs. Estate of
Late Sri T.P. Ramaswami Pillai [(1962) 46 ITR 666 (Madras)]
the testator created trust in respect of his properties.
The trust was for various purposes some being for the
benefit of the wife of the testator and others for certain
religious and charitable purposes. The testator appointed
his son and brother-in-law as trustees and almost imposed
certain duties of the executorial nature. These were like
payment of specific legacies and funeral expenses. The
trustees under the will filed returns stating that they
ceased to be executors and claimed that the trust was wholly
for religious and charitable purposes and thus, the entire
income from the properties was exempt from taxation.
Revenue contended that since the debts had not been fully
discharged the trustees could be assessed only as executors
under Section 41 of the Income Tax act, 1922 and income was
not exempt from tax. The question which came up for
consideration of the Court was whether any part of the
income of the estate of the testator was exempt under the
proviso to Section 4(3)(i) of the Income Tax Act, 1922. The
Court said that to the extent the income from the properties
specified in the will had been applied towards payment of
monthly allowances to the various relations of the deceased,
there would be no exemption under Section 4(3)(i) and the
rest of the income would be exempt from that provision. The
Court observed that there was no invariable role that an
executor could not shed his character as executor and assume
the character of trustee under the will before all the debts
are discharged and legacies are paid. The executor could
vest the property in the legatees with mutual consent and
hold the legacies as a trustee even before all the debts
were discharged.
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This judgment of the Madras High Court was followed by
the Bombay high Court in Court Receiver vs. Commissioner of
Income- Tax, Bombay City [(1964) 54 ITR 189 (Bombay)]. In
that case a Bench of the Bombay High Court was considering
the will under which the testator made certain dispositions
which were all of religious and charitable nature. This
constituted 1/3 of the property of the testator after
funeral expenses, expenses for obtaining probate and paying
debts of the testator, if any. One of the questions raised
was whether on the facts and in the circumstances of the
case 1/3 of the property mentioned in the will could be said
to be held under trust and thus exempt within the meaning of
Section 4(3)(i) of the Income Tax Act, 1922. The Court
answered the question in affirmative and said that it could
not be laid down as a general rule that when debts of the
testator are not paid, a trust cannot come into being. It
would depend on the facts of each case. The Court said that
there might be cases where the indebtness of the testator
was such as would come in the way of the creation of the
trust. It may be otherwise as well. The question that
arises in such cases is whether the executors had shed their
character as executors and assumed the character of trustees
under the will and each case has, thus, to be examined with
reference to the terms of the will.
We may also refer to a decision of this Court in
Navnit Lal Sakarlal vs. Commissioner of Income-Tax [(1992)
193 ITR 16 (SC)]. One Balabhai Damodardas executed a will
bequeathing all his property including his half share in a
firm to his two grandsons. Damodardas died on December 31,
1957. His son Sakarlal took charge of the properties left
by his deceased father and administered them. Income
therefrom was assessed in the hands of Sakarlal uptil
assessment year 1962-63. For assessment years 1963-64 to
1967-68, the Income Tax Officer sought to assess Navnit Lal,
one of the beneficiaries under the will respecting his half
share in income from the properties left under the will by
his deceased grandfather. Sakarlal for all intent and
purpose was executor of the will. The estate was not
distributed or applied for the benefit of the beneficiaries
till August 5, 1970. Even the firm in which the deceased
had half share was continuing and the executor had yet to
make arrangements regarding the revaluation of the share of
the deceased in the firm. This Court said that in the
absence of any steps taken by Sakarlal, the estate could not
be deemed to have been vested in the beneficiaries and the
administration of the estate could not be said to have come
to an end. The Court said that "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 assessed 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?" This Court upheld the order of the Appellate
Tribunal that Navnit Lal, the grandson and beneficiary could
not be assessed to tax on one half of the income from the
properties of the testator.
Reference may also be made to two more decisions, one
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of this Court in Administrator General of West bengal for
the estate of Raja P.N. Tagore vs. Commissioner of Income
Tax, West Bengal [(1965) 56 ITR 34 (SC)] and other of the
Madras High Court in Commissioner of Income Tax, Tamil
Nadu-II vs. Estate of Late A.V. Viswanatha Sastri [(1980)
121 ITR 270 (Madras)].
in Administrator General of West bengal for the estate
of Raja P.N. Tagore vs. Commissioner of Income Tax, West
Bengal [(1965) 56 ITR 34 (SC)] there were two questions
before this Court for its decision :
"I.Whether, on the facts and in the circumstances of
the case, the assessments on the Administrator-General of
West Bengal as an individual and not as representing the
shares of the various beneficiaries under the will of the
late Raja P.N. Tagore separately was in accordance with
law?
2. If the answer to question No.1 be in the
affirmative, then whether, on the facts and in the
circumstances of the case, the assessment of the said
Administrator-General at the maximum rate was legal?"
Under the will, the executor and trustees were
required to manage the estate of the testator for a period
of 15 years before the end of which numerous specific
legacies were to be paid out of the savings from the income
of the estate. The Administrator-General of West Bengal was
appointed as administrator and the letters of administration
de bonis non of the estate were granted to him. During the
relevant accounting period the administration of the estate
was not complete and the question as stated above was
whether the income from the estate of the testator was
specifically receivable on behalf of his sons, the residuary
beneficiaries. This Court held that Section 41 of the
Income-Tax Act, 1922 was not applicable as the Administrator
General received the income on his behalf as administrator
and not on behalf of five sons of the testator. Both the
questions were answered in affirmative in favour of the
revenue. This Court held that as the administration of the
estate was not completed, the Administrator- General
received the income of the estate on his behalf and not on
behalf of the residuary beneficiaries being the sons of the
testator. The Court also observed that a share of the
residue did not belong to the beneficiaries until it was
ascertained either in whole or in part by transfer or assent
to him or by appropriation.
In Commissioner of Income Tx, Tamil Nadu-II vs.
Estate of Late A.V. Viswanatha Sastri [(1980) 121 ITR 270
(Madras)] the testator, a senior advocate practising in the
Supreme Court, died. He executed a will by which he
appointed his son as an executor of the will. The son filed
returns in his capacity as an executor for certain years.
During that period, however, he received various amounts
which were professional fees payable to the deceased. He
did not offer these amounts for assessment claiming that
these professional fees were not liable to be taxed in his
hands. His plea was negatived by the revenue being of the
view that Section 176(4)of the Income Tax Act, 1961
specifically provided for taxability of the professional
income received after discontinuance of the profession and
included the arrears of the professional fees in the income
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earned from the estate of the deceased. The Court held that
the arrears of fees realised by the executor will have to be
taxed in his hands as a recipient in the year of receipt and
brought to tax in the hands of the executor along with the
income of the estate. The Court said that the legal fees
due to the deceased on the date of death was one of the
assets left by the deceased and would be part of his estate
and realisation of the arrears would amount to recovery of
part of the deceased’s estate.
Examination of the provisions of law and decisions in
the aforesaid cases does not lead us to lay any rule of law
as to when an executor sheds his character as an executor
and when wears the robes of a trustee. It all depends on
the construction of the will as to when the testator desired
the trust to come into being. For that we have also to see
as to when the functions of the executor administering the
estate of the testator come to an end. Under Section 302 of
the Succession Act, 1925 when probate in respect of any
estate has been granted the High Court may, on application
made to it, give to the executor any general or special
directions in regard to the estate or in regard to the
administration thereof. Section 317 of that Act imposes
various duties on the executors. Then under Section 366 the
surplus or residue of the deceased’s property, after
payments of debts and legacies, shall be paid to the
residuary legatee. Sections 317 and 366 are as under:-
"317. Inventory and account.-(1) An executor or
administrator shall, within six months from the grant of
probate or letters of administration, or within such further
time as the Court which granted the probate or letters may
appoint, exhibit in that Court an inventory containing a
full and true estimate of all the property in possession,
and all the credits, and also all the debts owing by any
person to which the executor or administrator is entitled in
that character; and shall in like manner, within one year
from the grant or within such further time as the said Court
may appoint, exhibit an account of the estate, showing the
assets which have come to his hands and the manner in which
they have been applied or disposed of.
(2) The High Court may prescribe the form in which an
inventory or account under this section is to be exhibited.
(3) If an executor or administrator, on being required
by the Court to exhibit an inventory or account under this
section, intentionally omits to comply with the requisition,
he shall be deemed to have committed an offence under
Section 176 of the Indian Penal Code.
(4) The exhibition of an intentionally false inventory
or account under this section shall be deemed to be an
offence under Section 193 of that Code.
366. Residue after usual payments to be paid to
residuary legatee.- The surplus or residue of the deceased’s
property, after payment of debts and legacies, shall be paid
to the residuary legatee when any has been appointed by the
will."
In the present case when we examine clause 20 of the
will read with other clauses, it is apparent that the trust
was to come into being only after funeral and other expenses
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met, legatees paid and properties converted into cash by the
executors and trustees that administration of the estate
would come to an end and all the amount thus lying with the
executors and trustees would form the corpus of the trust.
Functions of the trustees and executors as imposed upon them
did not come to an end till February 1964 and it, therefore,
cannot be said that there was any trust created under the
will till that time. Section 168(3) of the Act makes it
clear that executor will continue to be assessed until the
estate is distributed among the beneficiaries according to
their several interests.
Accordingly we uphold the decision of the High Court
in the impugned judgment and dismiss the appeal with costs.