TMI Blog1995 (9) TMI 379X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. Mrs. V.K.S. Bawa (the assessee) 57,55,371.50 Mrs. Ushmi Sethi 22,44,628.50 Assessee has met the consideration from the sale of shares and jewellery. The capital gains on the sale of shares had been disclosed by the assessee in assessment year 1992-93 as well as in assessment year 1993-94. However, benefit under section 54F was claimed in respect of the entire capital gains. The Assessing Officer rejected the claim of the assessee on the ground that one of the conditions I for grant of the benefit under section 54F was not satisfied in so far as assessee was the owner of another. residential house property at No. 1, Jor Bagh. In this connection, reference has been made by the Assessing Officer to the income-tax and wealth-tax returns filed by the assessee as also to the will of Mrs. S.D. Puri by virtue of which the aforementioned share in the residential house property had been bequeathed in favour of the assessee. 2. The assessee appealed to the CIT (Appeals), who vide consolidated order dated 21-2-1995, agreed with the Assessing Officer and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of the same was to be made in the hands of the executors under section 168 of the Income-tax Act, 1961. The learned counsel also pointed out that tenants of the premises, namely, M/s Asea Brown Boveri Ltd. were paying the rent by cheques in the joint names of Mrs. V.P. Puri and Mrs. V.K.S. Bawa. The rent, according to the learned counsel, was being collected as administrators of the property and after meeting the expenses the proceeds of rent were distributed amongst the legatees. The learned counsel also pointed out that Shri S.L. Bawa one of the executors having died on 14- 9-1988. The rent was being collected in the name of Shri V.P. Puri and Smt. VKS. Bawa. Relying upon the decision of the P H High Court in the case of CIT v. Bakshi Sampuran Singh (1982) 133 ITR 650at page 655, the learned counsel contended that mutation of the property was necessary for completion of the administration of the will. Our attention was also invited to section 211 of the Indian Succession Act, 1925 in support of the contention that the property vests in the executor though he is not the owner of the property. Reliance was also placed on the decision of the Supreme Court in the case of Navnit La ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would not be sufficient to deny the benefit of section 54F to the assessee, contended the learned counsel. 5. Referring to the suggestion of the Bench that keeping in view the conduct of the legatees and executors into consideration, could it be deemed that there was distribution of the assets, the learned counsel contended that though the Assessing Officer has suggested in the assessment order about the deemed distribution of assets amongst the legatees, CIT (Appeals) has not recorded any finding in regard to this issue. It was accordingly contended that in case the Tribunal considers it necessary to decide this issue, the matter accordingly should be referred back to the CIT (Appeals) for recording a finding on this issue as assessee could not be deprived of a forum of appeal available to him in this regard in the shape of first appellate authority. In this connection, reliance was placed on the decision of the Supreme Court in the case of CIT v. Shapoorji Pallonji Mistry (1962) 44 ITR 891 . The learned counsel further contended that the Department cannot take advantage of the returns filed by the assessee as the principle of estoppel does not apply to income-tax proceedings. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r nor before the CIT (Appeals). (Page No. 22 being copy of application for mutation of 1, Jor Bagh property). Page Nos. 27 and 28 of the paper book, i.e., copy of the house-tax receipts and copy of the. affidavit of the executor placed according to the learned D.R., had not been filed before the Assessing Officer and were filed before the CIT (Appeals) for the first time. Apart from pleading prompt action against the firm for giving a wrong certificate, the learned D.R. contended that the evidence placed at page 22 of the paper book is incomplete in so far as the affidavits attached to the application have not been filed perhaps deliberately before the Tribunal. The learned D.R. sought the permission of the Bench to file these affidavits which, according to her, should be sufficient to reject the claim of the assessee about the non-distribution of the property as in the affidavits Mrs. V.K.S. Bawa, i.e., the assessee has herself stated on oath that her husband was the co-owner of the property No. 1/172 Jor Bagh, New Delhi. (Shri S.L. Bawa the husband of the assessee is also one of the legatees as per the will of Smt. Shanti Devi Puri). The daughter of Shri S.L. Bawa has also depose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Estate of Late Lala Karam Chand Thapar(supra), the learned D.R. contended that assessment is to be made in the case of executors until the administration of the estate is complete. However, in this case, the administration of the estate having been completed, the assessment in the case of executors was not to be made. The learned D.R. further contended that the decision of the Andhra Pradesh High. Court in the case of S.M Bhandari(supra) was inapplicable to the facts of this case as there was no residuary legacy in this case. Referring to section 211 of the Indian Succession Act, 1925, the learned D.R. contended that the property covered by a will vests with the executor or the administrator, as the legal representative of the deceased person till the property is distributed amongst the legatees. Reference was also made to sections 119,327,332,333,336 337 of the Indian Succession Act in support of the contention that the executor/administrator is bound to deliver the legacy as soon as it is practicable. The executor may not be bound to pay to any legacy until the expiration of one year from the testator's death. However, after the expiration of one year, the executor canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property is available subject to investment being made on the purchase or construction of a residential house property and subject to the condition that he is or does not within specified period become owner of another residential house property, the income where from is assessable to tax under the head ';Income from House Property';. The benefit of section 54F has been denied to the assessee by holding that she was the owner of 1/4th share of the residential property situated at 1, Jor Bagh, New Delhi. The proposition of law that once she is the owner of the property, the benefit under section 54F would not be available to the assessee, is not disputed. What is disputed is the ownership of the property which shall hereinafter be referred to as ';Jor Bagh Property';. In this connection, it is necessary for us to refer. to the will executed by Mrs. S.D. Puri, the mother of the assessee in the year 1978 which was duly registered. The testator, namely, Mrs. S.D. Puri died in the year 1984. Probate of the will was granted by District Judge, Delhi under section 289 of the Indian Succession Act XXXIX of 1925 in case No. 23/85 vide order dated 7-8-1987. Shri V.P. Puri and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 20,000 each be paid to my grand daughters Miss Rashmi Bawa and Miss Ushmi Bawa, daughters of my daughter Mrs. Ved Kumar Bawa on the occasion of their wedding. If they do not marry till the age of 25 years, then this amount of ₹ 20,000 may be given to them. (b) To give the following on the occasion of their marriage, diamond sets worth ₹ 5,000 provided they marry according to Hindu customs: (i) Miss Rashmi d/o Mrs. Ved Kumari Bawa ₹ 5,000 (ii) Miss Ushmi d/o Mrs. Ved Kumari Bawa ₹ 5,000 (iii) Mr. Ashman s/o Shri Brahm Prakash Puri ₹ 5,000 (c) I also direct my Executors that amount of Rs, 5,000 may be given to Mrs. Savitri Chadha. A further amount of ₹ 15,000 may be retained by the executors to be utilised for the welfare of the widows of the Puri family and poor children. Clause 5 of the will provides that in case the executors do not have sufficient wealth then they might even reduce or to alter the distribution directed in clause 4. In clause 6 a sum of ₹ 10,000 each was directed to be paid to Shr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the testators or by the Court. Section 213 of the Indian Succession Act, 1925 provides that no right as executor or legatee can be established in any Court of justice unless a court of competent jurisdiction in India has granted probate of will under which the right is claimed or has granted letters of administration with the will or with a copy of the authenticated copy of the will annexed. 14. The executor is personification of the deceased. An executor holds the estate as representative of the deceased and not on behalf of any beneficiaries. Chapter VII of the Indian Succession Act, 1925 defines the duties of the executors. These are, inter alia to pay the funeral expenses, the expenses for obtaining the probate to pay the specific legacies and to pay the debts of the deceased and to administer the estate in accordance with the directions of the testator. When all this has been done, the balance left in the executor's hands the residue and has got to be paid to the residuary legatee under section 366 of the Indian Succession Act, 1925 or held in trust from that if the direction in the will required the residue to be held. 15. Chapter VIII of the Indian Succession Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd residuary estate has been ascertained. 17. In the present case, it has accordingly to be ascertained as to whether the administration of the estate had been completed by the executors and as to whether the assent had been given by the executors and as to whether the legatees have become the owners of the bequest property. 18. We have elsewhere mentioned in this order that every thing required for distribution of assets had been done by the executor (s). The claim of the assessee that the property had not been distributed amongst the legatees and that the rent was being collected by the executors is contrary to facts on record. As already pointed out, the testator had appointed two executors, one of whom namely Shri V.K.S. Bawa had expired in the year 1988. There was thus only one surviving executor namely Shri V.P. Puri. This has also been admitted by the assessee in the statement of facts filed before the CIT (Appeals) in para 6 where it has been stated as under: In 1989 Mr. S.L. Bawa, one of the joint executors expired and Shri V.P. Puri became the sole executor of the said estate. He administers the property, collects the rent, pays the taxes and after meeting su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .L. Bawa was my husband and he died on 14-9-1988 at London. 2.That the deceased was co-owner of property Block No. 1/172, Jor Bagh Nursery, New Delhi. 3. The deceased has left behind following heirs.....…………………….. 5. That the deceased has left no will. 20. In a separate affidavit Mrs. Rashmi Kaura, the daughter of Shri S.L. Bawa has also made a declaration that Sh. S.L. Bawa who died on 14-9-1988 at London was the co-owner of the property at 1/172, Jor Bagh Nursery, New Delhi. When assessee has filed the income-tax returns claiming herself to be the legal owner of 1/4th share of residential property at Jor Bagh, when she has stated on oath that her husband, who is one of the legatees as per the will of Mrs. S.D. Puri was the owner of 1/4th share of Jor Bagh property at the time of his death on 14-9-1988, when everything that was required to be done under the will had been completed, could it be said that the distribution of the property as per the will had not been completed. Apart from the fact that L DO had demanded a sum of ₹ 60 lakhs for effecting mutation in the name of persons, who were not in the direct line of succe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ministration of the estate had not been completed was accepted by their Lordships of the Supreme Court. At page 23 of the report it was observed by their Lordships There is nothing in the statement of facts or in the orders of the authorities to indicate that there was any deliberate attempt on the part of the executor to postpone the distribution of the estate. As we have mentioned earlier Balabhai Damodardas died on 31-12-1957 and the assessment of the estate duty of the estate passing on his death was completed on 30-12-1961. There is nothing to indicate that assessment proceedings were in any way delayed by the executor or other legal representatives . 24. Their Lordships further held Though a reference has been made to the estate duty liability being outstanding there is nothing to show that only thing that remained to be done was the payment of the estate duty and nothing else remained to be done. Their Lordships further held that the discharge of estate duty liability in respect of the estate of the deceased is one of the primary functions of an executor and that the administration of the estate cannot be said to be complete until the estate duty liability is properly p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, if the lessor so desires, he shall have pre-emptive right to purchase the property after deducting 50 per cent of the unearned increase in the value of the land. Does this covenant merely impose a personal obligation on the lessee which arises on assignment of the leasehold interest or is it a covenant running with the Land. That is a question which has a direct bearing on the valuation of the leasehold interest. Now, the last portion of the first paragraph of clause provides that all such assignees and transferees shall be bound by all the covenants and conditions herein contained and be answerable in respect therefor. This means that whenever an assignment of the leasehold interest is made by the lessee, the assignee would be bound by all the covenants contained in the lease deed and these would indisputably include the covenant in clause (13). Clause (13) would equally bind the assignee and if the assignee in his turn wants to assign his leasehold interest in the land he would have to obtain the prior approval in writing of the lessor to such assignment and the lessor would be entitled to claim 50 per cent of the unearned increase in the value of the land. This indeed was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities. Moreover, it is noteworthy that the probate of the Will had been obtained somewhere in the year 1987. There is no explanation on behalf of the assessee as to why no action had been taken by the executors for mutation of the property till 4-7-1991 when it is claimed that mutation of the property was essential for completion of distribution of the property. From the application filed before the L DO authorities along with the affidavits, it is evident that the assessee as well as the other legatees including the executor had not been aware of the possibility of the L DO authorities treating the bequeath as a transfer in favour of the persons who do not fall under the direct line of succession. 28. As is clear from the facts on record, the unearned increase was not payable by the executor but by the legatees other than the assessee for the purposes of mutation in their favour. The mutation in the L DO records serves as an evidence of ownership in respect of immovable property. The property in the legatees vests as soon as the assent of the executor is granted. The title of the legatees is complete and it relates back from the date of the death of the testator. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not entitled to relief under section 54 of the Income-tax Act, 1961. 34. Before we wind up, we would like to point out that the decisions relied upon by the learned counsel for the assessee which have not been referred to by us in the operative portion of the order are not relevant and accordingly inapplicable. Though we may not make specific mention of all such cases, we would like to refer to the decision of Karnataka High Court in the case of R. G. Mundkar (supra). This decision relates to the valuation of assets under the provision of the Wealth-tax Act. Without going to the facts of the case, it is sufficient to say that in the case of the assessee, there was no demand of unearned increase by the L DO authorities as she was in the direct line of succession of the deceased, namely Smt. Shanti Devi Puri. 35. The decision of Delhi High Court in the case of Sushil Ansal(supra) is also inapplicable to the facts of this case. This decision was relating to the transfer of property by sale and their Lordships of the Delhi High Court held that without the registration of the conveyance deed, the assessee could not be held to be the owner of the property within the meaning of sec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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