TMI Blog1961 (10) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... The following are some of the provisions of this will: After my lifetime after the 10th day funeral rites are over, the aforesaid trustees shall take possession of all my properties, cash on hand and the account books, after taking proper accounts with the assistance of kanakkupillais employed in my office, and do all things in accordance with this will. My son, Sivakumaran, shall safeguard the properties and the account books until then and hand them over to the trustees. The trustees shall not only take possession of the properties given to me by the grace of Lord Thiruvateeswarar and set out in Parts I and II of Schedule A below but shall also treat the properties left out by me by oversight as properties included in this will and take possession of them. In addition to this, the trustees shall take possession of my accounts also, ascertain the profit and loss and deducting the amounts payable according to this will, invest the remaining moneys in Government securities or in buildings which will yield income. From out of the income of the said properties payments shall be made as stated below for the maintenance of the respective persons and for charitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee's claim cannot be accepted. According to the terms of the will all the properties except jewels and vessels were to be taken under the trust and certain allowance payments were to be made to specified persons and to charities from out of the income of the properties. It is clear, therefore, that the trust is not a specific legatee within the definition in section 142 of the Indian Succession Act, viz., ' where a testator bequeathes to any person a specified part of his property which is distinguished from all other parts of his properties the legacy is said to be specific'. The assessee's wife and son are specific legatees in respect of the jewels and vessels bequeathed to them in paragraphs 14, 15 and 16 of the will. The residue of the estate is bequeathed in trust. Under section 366 of the Indian Succession Act, ' the surplus or residue of the deceased's properties, after payments of debts and legacies should be paid to the residuary legatee when any has been appointed by the will'. Therefore, unless and until the residuary estate has been ascertained the residuary legatee would acquire no interest in the property. Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r all the years is annexed hereunto as annexure C and forms part of the case. 13. The assessee thereupon appealed to the Tribunal repeating the same contentions as before the Appellate Assistant Commissioner. In these appeals the Tribunal held in its preliminary order as follows: No doubt, as stated by the income-tax authorities, the executorial functions must cease as a condition precedent for trusteeship to start, In this case, however, trusteeship in the above facts and in the peculiar circumstances of the case can be said to have started almost immediately the executors obtained probate and all the properties to automatically vest in the trustees, due not only to same identity of the two officers but also due to the fact that the entire corpus of the estate going only to trust. It is only the income that requires to be distributed to the annuitants. Administration of the estate and filing of final accounts thus become mere formalities to complete the title of the trustees. In the above factual appreciation of the peculiar set up in this case, the income from properties which formed the onty income of the testator after his death can be said to accrue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, his son, Sivakumaran, and his brother-in-law, Ramaswamy Pillai. The relevant clauses of the will are these: At present many charities are being performed by me from out of the income of the aforesaid properties. I intent that even after my lifetime the said charities and some other charities besides, should be performed. Those charities are set out below. I appoint the undermentioned persons trustees so that the aforesaid charities may be performed in perpetuity: 1. My son, Selvachiranjeevi Sivakumaran alias Kannappan. 2. His maternal uncle, Ramaswamy Pillai, son of Ponnuswami Pillai. The testator then proceeded to prescribe the succession to the office of trusteeship, and stated: After my lifetime, after the tenth day funeral rites are over, the aforesaid trustees shall take possession of all my properties, cash on hand and the account books, after taking proper accounts with the assistance of kanakkupillais employed in my office, and do all things in accordance with this will. My son, Sivakumaran, shall safeguard the properties and the account books until then and hand them over to the trustees. The trustees shall not only take possession of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his view that probate was applied for on the original side of this court in respect of the will by Sivakumaran and Ramaswamy Pillai. Probate was duty granted to them and in compliance with the terms of the probate the executors aforesaid filed their accounts for administration from the date of death of the deceased till August 23, 1950, the date up to which accounts were directed to be filed. As we stated earlier, there were considerable debts due by the deceased. A portion of them, however, appears to have been paid. The claim in respect of specific legacies, namely, those relating to the handing over of the jewels and other movables, were also discharged. But it is conceded that a substantial portion of the liabilities still exists. Sivakumaran and Ramaswamy Pillai filed Nil returns during the four assessment years 1950-51 to 1953-54, the year of account of the assessee ending with 30th of September of the previous year. They stated that as they had become the trustee for the various purposes set out in the will and as the trust was one which was wholly for religious and charitable purposes, the income from the properties was exempt from taxation. It was also contended that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held assessable. Exemption was granted in respect of the other income which was devoted to the charities. The Income-tax Officer was directed to amend the assessment accordingly. The conclusion of the Tribunal is challenged in this reference by the department on the ground that the estate of the deceased still continues with Sivakumaran and Ramaswamy Pillai in their capacity as executors and that the same had not yet vested in the trustees for the purposes designated under the will. A reading of the will would show that the entire properties have been given to the two trustees in trust for the various purposes set out therein, some of them being for the benefit of the wife and son of the deceased and some of them of religious and charitable purposes. The only function which the trustees had to do in their capacity as representatives of the deceased was to pay the funeral expenses of the deceased, hand over the jewels and moveables and monies in respect of the specific legacies and to discharge the debts of the deceased. The debts no doubt have not been discharged in their entirety but the other duties have been duly performed by the executors. They have categorically stated, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated as trustees of the charities, will be trustees as well for making the monthly payments to the relations, etc. The property is given to them with a burden, namely, of making the payments for the maintenance, etc. That being a specific duty case on them, the property of the testator should be held to vest in them for the purpose of payment to the relations, as also for the performance of charities. The trust is one and single. It cannot be held that a portion of it, namely, the monthly payments to the relations are specific legacies, while the one for the charities alone is a residuary legacy. In this view, no question of establishing a fund for payment of the maintenance, etc., can arise. We shall however deal with the contention regarding the obligations of the executors to establish a fund therefor on the footing that the recurring payment to the relations are specific legacies. But before we do so, it is necessary to state the general principles as to the vesting of the property from the executors in the legatees. Under section 211 of the Indian Succession Act, an executor under the will of a deceased person will be his legal representative for all purposes and the proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , however, be a difference between a specific legacy and the residuary legacy in the matter of assent. The residuary legacy could be ascertained only after payment of the debts, specific legacies, charges, etc. But, in any case, an assent on the part of the executors to the taking effect of the legacy will vest title in the legatee. If after such assent the executor continues in possession of the property bequeathed, he would cease to be an executor and become the trustee for the legatee concerned. In a case where an executor himself gets a legacy under the will, his assent will, ipso facto, make him the owner of the thing bequeathed to him. We shall consider presently whether there are any impediments to the executor assenting to a residuary legacy after paying off the specific legacies but before paying off the debts of the deceased. An assent may be either express or implied. No formality is required for giving an assent to a legacy. Where the assent is express there will be no difficulty in regard to the vesting of the property. Whenever an implied assent is pleaded, the question will always arise whether from the facts and circumstances, e.g., conduct, an implied absent can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation the administration, in the sense in which it is contended for on behalf of the department, can never be complete within a reasonable time. Realising this difficulty, Mr. Ranganathan states that the executors can create a fund for meeting the monthly payments under section 343 of the Indian Succession Act by disposing of the property. Section 343 refers to a case of annuities under a will where no charge has been created in respect of the payments to be made. In the present case the income from the properties are charged for the payment and we cannot see how the provisions of section 343 can at all be invoked. A similar argument was attempted in R.C. No. 36 of 1950. The learned judges, Satyanarayana Rao and Rajagopalan JJ., rejected it. In that case the will provided for certain charities to be carried out from and out of the income of the property and a business disposed of under the will. It was held that having regard to the vicissitudes of business and the uncertainty of the income, the obligation imposed on the executors could not in the nature of things permit the bringing into existence of a fund as contemplated in the case of annuities and similar bequests and that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the testator (the residuary legatees) from out of the amounts with them after crediting the share of the income relating to the residuary estate in their favour and debiting the payments made. One of the sons of the testator was assessed to super-tax in respect of the amount received from the executors. It was contended that as the mortgages had not been paid off, there was no ascertainment of the residue and what the son of the testator received from the executors was not really income from his own property, as such property could not be deemed to be vested before the residue was ascertained. This contention was negatived by the Court of Appeal. Lawrence L.J. observed: It has been mooted, but I do not think seriously contended, that the existence of a debt or debts, or liabilities which are outstanding prevents the assent of the executor being inferred by his conduct. In my judgment, that is not so. This view was affirmed recently in Carlish v. Commissioners of Inland Revenue [1958] 38 Tax Cas. 37, 63 In the present case there is no difficulty about the ascertainment of the residue. The properties have been specified in the will itself. After the paym ..... X X X X Extracts X X X X X X X X Extracts X X X X
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