TMI Blog1991 (10) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... ovable property which is being assessed to income-tax as individual. (b) Whatever right, title and interest I have in movable and immovable properties of our joint family. 3. The above movable and immovable properties I may enjoy, sell or exchange in future, but, if, by God's will, at the time when I am not alive, whatever is left of my individual personal property of my ownership including additions or deletions therefrom after paying my debts, income-tax, super tax, estate duty, municipal tax, etc., and any other outstandings as also medical expenses and expenses for obsequial ceremonies and charity and also my right, title and interest in our joint family movable and immovable properties, in that way all my property when I am not alive shall be taken possession of by my two grandsons Navnitlal Sakarlal and Nandkishore alias Shamubhai Sakarlal and they shall use and enjoy the same as they desire." There was no executor named in the will. Balabhai Damodardas died on December 31, 1957. Thereafter, his son, Sakarlal Balabhai, describing himself as the legal representative of the deceased, furnished returns of income as well as returns of net wealth in respect of the estate o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income-tax Appellate Tribunal was right in law in holding that half share of the income in respect of the estate of late Shri Balabhai Damodardas was not taxable in the hands of the assessee when the estate was being administered by Shri Sakarlal Balabhai, having regard to the provisions of section 168 of the Income-tax Act, 1961?" This question has been answered by the High Court its decision has been reported as CIT v. Navnitlal Sakarlal [1980] 125 ITR 67 (Guj) in the negative and in favour of the Revenue. The present appeals have been preferred by the assessee from the High Court's judgment. At the outset, two aspects which had been raised before the High Court may be cleared up. In the first place, the contention of the assessee before the High Court was that the decision in the wealth-tax case would not govern the income-tax assessments in view of the provisions contained in section 168 of the Income-tax Act, 1961, a provision corresponding to which (viz., section 19A) has been introduced in the Wealth-tax Act only on April 1, 1965. The High Court pointed out and it is common ground before us that, "in view of the distinction between the provisions of the Wealth-tax A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, 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. Explanation. -In this section, 'executor' includes an administrator or other person administering the estate of a deceased person." On behalf of the appellant, Sri Salve submits that, where a person dies, the income from the estate of the deceased person is chargeable to tax in the hands of the executor, separate assessments being made on the total income of each completed previous year or part thereof comprised 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" He points out that it is now common ground that Sakarlal Balabhai was an " executor" within the meaning of section 168 in respect of the estate of the deceased. The Tribunal has also given a categorical finding of fact in the following terms "Balabhai Damodardas died on December 31, 1957, leaving behind as his next-of-kin a son, n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any material. In the face of these findings by the Tribunal, it is not possible to hold that the administration of the estate was complete in any of the previous years with which we are concerned. On behalf of the Revenue, Sri Manchanda vehemently contends that the will contained a direct and simple bequest in favour of the assessee and his brother. He submits that there was nothing in the estate to be administered and that the properties directly vested in the two legatees immediately in equal shares. According to his submission, the mere fact that Sakarlal Balabhai purported to take charge of the estate and administer it and was prolonging the so-called administration by delaying the payment of estate duty and the handing over of the properties to the only two legatees, cannot postpone the vesting of the estate in the two beneficiaries. It is submitted that there was no complicated process of administration called for in the present case. He submits that the intervention of Sakarlal Balabhai was part of a device to postpone a direct and immediate vesting of the income and the properties in the hands of the legatees in view of the high rates of tax applicable to their individual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e discharge of the estate duty liability is the personal liability of the residuary legatees and is no part of the duties of the executor. This argument has been accepted by the High Court. On behalf of the assessee, it is submitted that the discharge of the 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 provided for, vide CIT v. A. Ghosh [1986] 159 ITR 124 (Cal). We are of opinion that there is force in the appellant's contention. It seems that, under the English law, estate duty is regarded as part of the "testamentary expenses" in respect of certain kinds of property: [ Williams on Executors and Administrators, 14th Edn., Vol. 1, pp. 452-54 ]. The Estate Duty Act makes the executor one of the accountable persons. Under section 55, he has to deliver an account of the estate passing on the death. He is accountable, under section 53, for the whole of the estate duty on the property passing on the death though he will not be liable for duty in excess of assets of the deceased which he had actually received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e us, the residuary estate must be deemed to have been ascertained and the residuary estate must be said to have taken concrete shape and should have been handed over by Sakarlal, the father of the assessee, and that the administration had reached such a point that one can infer that the administration had been completed and the residuary estate had been ascertained or was capable or easily capable of being ascertained." We find it difficult to accept this conclusion. Even leaving the estate duty out of account, it is difficult to see how the High Court could have reached this conclusion. Having regard to the nature of the properties left by Balabhai Damodardas, it is clear that the executor had certain steps to take before he could wash his hands off the administration of the estate. The movable properties and the immovable properties belonging to Damodardas in his individual capacity had to be divided into two equal shares and handed over to the two beneficiaries. A perusal of the assessment order also indicates that Balabhai Damodardas had a half share in a firm known as Mangaldas Balabhai and Co. It appears that Sakarlal Balabhai, as executor, continued to derive a half share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty which was his virtute officii, and the legatees have vested in them as owners, the property in the subject-matter of the bequests. Under sections 332 and 333 of the Succession Act the assent of the executor to legacy may be express or implied from his conduct. By assent is meant not that the executor concurs in the dispositions in the will but that he assents to the disposition taking effect upon the specific property if the bequest is specific, upon the sum of money if it is pecuniary or upon the residue brought out by the executor at the end of the administration, if it is residuary bequest. There is the same necessity for the executor's assent to a bequest of the residue as to a bequest of a specific or pecuniary legacy. So soon as he assents to the dispositions of the will and the assent may be express or implied from his conduct they become fully operative and the title of the legatees becomes absolute. If there are trusts declared or created by the will in respect of the subject-matter of the bequest, the trusts take effect on such assent, the estate vested in the executor as such is divested and vests in the trustees of the will. The fact that the executors are thems ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tration 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 ?" (emphasis added). We have, therefore, to look at the factual position and find out whether the executor has ascertained the residue and acknowledged its existence. Even taking it that the last sentence of the above quotation goes a little further and enables the court to "deem" the administration to have come to an end where the facts clearly show that everything necessary has been done in this regard, it is difficult to accept the conclusion of the High Court in the present case that the administration must be deemed to have come to an end in the face of the factual findings in the case which have been referred to earl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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