TMI Blog1980 (3) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... and since the assessee had become the sole owner of the estate, he should have declared all the assets left by the father as his wealth. Consequently, he included " the wealth of the estate as the wealth or the assessee " in his personal assessment. In respect of the assessment year 1965-66, for which the valuation date was 31st March, 1965, also the assessee did not include in his wealth what according to him was the unadministered estate of the deceased father on 31st March, 1965. The WTO, however, had declined to make any separate assessment in respect of what was described by the assessee as " unadministered assets of late Shri K.C. Mahindra ". The AAC of Wealth-tax, in the appeal filed by the assessee, in which it was contended on his behalf that the father's estate was under administration on the relevant valuation date and, therefore, it could not be included in the net wealth of the assessee, took the view that the provisions of s. 19A of the W.T. Act, 1957 (hereinafter referred to as " the Act "), were not applicable, and he maintained the order of the WTO by which the wealth left by the father was included in the net wealth of the assessee for both the years. In the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axes ultimately found payable are to be deducted ? 2. Whether, in computing the net wealth of the assessee, the value of the assets left by the assessee's father is to be included ?" Assessment year 1965-66: " 3. Whether, in computing the net wealth of the assessee, the liabilities for direct taxes in respect of pending assessments of the assessee and the assessee's father on the valuation date should be deducted according to the respective returns submitted or the taxes ultimately found payable are to be deducted ?" Assessment year 1965-66-At the instance of the assessee: " 4. Whether, in computing the net wealth of the assessee, the value of the assets inherited from the assessee's father is liable to be included ? " On a reading of the questions reproduced above, it is apparent that questions Nos. 1 and 3 are identical, but have been separately referred because of the two different assessment years in which they arose. Questions Nos. 2 and 4 are also identical and question No. 4 has come to be referred at the instance of the assessee, because the Tribunal accepted the contention of the department for the assessment year 1965-66, that the assets inherited by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istration, he was still a person who was administering the estate of a deceased person, as contemplated by the Explanation to s. 19A of the Act. The learned counsel, therefore, contended, relying on the decision of this court in Jamnadas v. CWT (1965] 56 ITR 648, that the assessment for the year 1964-65, in respect of the net wealth left behind by the father, should be made against him as a legal representative of the father and the assessment for the next assessment year 1965-66 should be made in respect of the estate of the deceased having regard to the Explanation to s. 19A. Therefore, according to the learned counsel, for none of these two years, the assets left behind by the father could be included as a part of the assessee's own net wealth. Indeed, according to the learned counsel, the same mode of assessment will have to continue until the administration of the estate of the deceased father is completed. We have been told that as a person administering the estate of his deceased father, the assessee has to perform certain functions such as recovering certain debts, payment of certain debts, filing of an estate duty return, payment of estate duty determined in respect of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... last day of the previous year as defined in s. 3 of the I.T. Act, 1961, in relation to any year for which an assessment is to be made under the Act. There is no dispute that the two valuation dates, in the instant case, are 31st March, 1964, and 31st March, 1965. Before we go to the definition of " net wealth ", we may refer to the provisions of s. 14 of the Act which deals with the procedure relating to assessment. Section 14(1) provides that every person, if his net wealth or the net wealth of any other person in respect of which he is assessable under the Act on the valuation date was of such amount as to render him liable to wealth-tax under the Act, shall, before the 30th day of June of the corresponding assessment year, furnish to the WTO return in the prescribed form and verified in the prescribed manner setting forth the net wealth as on that valuation date. The proviso to s. 14(1) is not relevant for our purpose. Section 14(1), therefore, provides that if person has his net wealth on the valuation date of such an amount which will render him liable to wealth-tax, then he must file a return before 30th June of the corresponding assessment year. Section 14(1) also provides ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... termination of net wealth are the debts which are owed on the valuation date. Two things are important in the definition of " net wealth ". They are that the assets wherever located are to be ascertained and valued in the manner prescribed by the Act and those assets must belong to the assessee, on the valuation date. The words " belonging to the assessee " used in the definition of " net wealth " have been construed by the Supreme Court in CWT v. Bishwanath Chatterjee [1976] 103 ITR 536. Referring to the meaning of the word" belong " in the Oxford English Dictionary, which was given as " to be the property or rightful possession of ", the Supreme Court has pointed out that the liability to wealth-tax arises out of ownership of an asset and mere possession unaccompanied by the right to, or ownership of, property would not bring the property within the definition of " net wealth ". The relevant observations of the Supreme Court are as follows (p. 539): " So it is the property of a person, or that which is in his possession as of right, which is liable to wealth-tax. In other words, the liability to wealth-tax arises out of ownership of the asset, and not otherwise. Mere possessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, he cannot be assessed and that that wealth cannot be treated as a part of his net wealth. As already pointed out, the assessee has inherited certain assets from his father, being the only son of the father. It is well-known that inheritance is never in abeyance, and inheritance has taken effect in the instant case the moment the father died, with the result that the property immediately devolved on the assessee as the sole heir of his father. If the property has devolved on the assessee as the sole heir by the law of inheritance, it is difficult to see how one can resist the conclusion that the property which is now sought to be treated separately for the purposes of assessment to wealth-tax does not belong to the assessee. In order to show that the property belongs to an assessee when he succeeds by inheritance, Shri Joshi has referred to certain decisions which deal with the effect of the death of a Hindu who is governed by the Dayabhaga law, and the question was whether in such a case the assessment to wealth-tax could be made as an HUF or whether the heirs were liable to be assessed separately to wealth-tax. In CWT v. Gouri Shankar Bhar [1968] 68 ITR 345 (Cal), a Hindu f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the heirs under s. 21 of the Act inasmuch as under the Dayabhaga law the shares of the heirs are defined and ascertained. Shri Joshi has also referred to the decision of the Supreme Court in appeal against the decision of the Calcutta High Court, which is reported as CWT v. Gauri Shankar Bhar [1972] 84 ITR 699. The Supreme Court confirmed the view of the Calcutta High Court that in that case each heir took a definite share in the property and was liable to pay wealth-tax as individual on the share that devolved on him. Shri Joshi has also relied on certain observations of the Supreme Court in Bishwanath Chatterjee's case [1976] 103 ITR 536 (SC), which also dealt with a case where property devolved on the heirs of an individual who was governed by the Dayabhaga law dying intestate, and the Supreme Court held that each coparcener took a defined share in the property and was the owner of his share and each such share thus belonged to the coparcener and that it was his net wealth within the meaning of s. 2(m) and was liable to wealth-tax as such under s. 3. These three decisions were relied upon by Shri Joshi to contend that even in a case where the heirs took the property in d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment year, corresponding to the financial year in which Sodradevi had died, was not in dispute. We may at this stage once again mention that Shri Dastur has argued that just as in Jamnadas' case [1965] 56 ITR 648 (Bom) for the assessment year corresponding to the financial year in which the assessee had died, in that case, the executors were assessed to wealth-tax, in the instant case also, for the assessment year 1964-65, which corresponds to the financial year in which the father of the assessee died, the assessee should be assessed as a person administering the estate. Now, what happened in Jamnadas' case [1965] 56 ITR 648 (Bom) was that the real controversy was with regard to the assessment for the assessment year 1961-62, corresponding to the financial year ending on 31st October, 1960. The WTO served notice on the executors on 8th August, 1961, under the provisions of s. 14(2) requiring of them that a return should be filed in connection with the wealth-tax payable by the estate of the deceased. The executors also filed a return, and the WTO determined the net value of the wealth of the deceased. In the order the name of the assessee was mentioned as " Estate of Smt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment year 1965-66, and indeed very rightly so, because for the assessment year 1965-66, s. 19A was already on the statute book. In so far as the decision in Jamnadas' case [1965] 56 ITR 648 (Bom) is concerned, it may be pointed out that there was no provision analogous to s. 19A in the relevant assessment year 1961-62. It is very clearly stated before us that Jamnadas' case [1965] 56 ITR 648 (Bom) was relied upon for the limited purpose of contending that for the assessment year 1964-65, the assessment should be made, in the instant case, against the assessee as a legal representative or as a person administering the estate, just as in Jamnadas' case [1965] 56 ITR 648 (Bom), the assessment for the assessment year 1960-61 was made on the executors even though the assessee had died prior to the valuation date. Jamnadas' case [1965] 56 ITR 648 (Bom), in our view, cannot be taken as an authority for the proposition that where an assessee dies prior to the valuation date, the assessment should be made against the heir as an administrator or as a person administering the estate. The question so far as the assessment years 1964-65 and 1965-66 in the instant case are concerned will, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e estate according to their several interests. (6) In computing the net wealth on any valuation date under this section, any assets of the estate distributed to, or applied to the benefit of, any specific legatee of the estate prior to that valuation date shall be excluded, but the assets so excluded shall, to the extent such assets are held by the legatee on any valuation date, be included in the net wealth of such specific legatee on that valuation date. Explanation.-In this section, " executor " includes an administrator or other person administering the estate of a deceased person." A consideration of the scheme of these two provisions is necessary in order to decide the contention raised before us with regard to the liability of the assessee. Sections 19 to 22 are contained in Chap. V which is headed as " Liability to assessment in special cases ". Section 19A was enacted for the first time with effect from 1st April, 1965. Thus, the provisions in Chap. V deal with assessment in special cases, and before any one of these provisions in Chap. V are invoked, it must be found that the general provisions relating to assessments are inapplicable to a case which is sought to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he WTO to make an assessment of the net wealth of such person. The power under sub-s. (2), therefore, is to assess the wealth of the person as on the valuation date before his death. By sub-s. (3) the provisions of ss. 15, 16 and 17 have been made applicable to the executor, administrator or other legal representative as they apply to any person referred to in those sections. We have, therefore, no doubt that so far as s. 19 is concerned, it positively deals with a case where an assessee dies after, a relevant valuation date on which his liability to pay wealth-tax has accrued. It is that liability which has to be worked out via the provisions of s. 19 and the tax which the deceased was liable to pay or any other sum, which would have been payable by him if he had not died has to be paid by the executor, administrator or other legal representative, subject to the limitation that it shall be paid out of the estate of the deceased and to the extent to which the estate is capable of meeting the charge. When we now come to s. 19A, on which heavy reliance is placed on behalf of the assessee, it will be noticed that what has been made chargeable under s. 19A is the net wealth of the es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ministrators and Probate by Williams and Mortimer (1970 Edn.), in Chap. 50 (at p. 458), dealing with the nature of the estate, the learned authors have observed as follows: "The interest which an executor or administrator has in the property of the deceased is different from the absolute and ordinary interest which everyone has in his own property; for an executor or administrator has his estate as such in autre droit merely, viz., as the minister or dispenser of the property of the dead." Describing the executor as the person appointed by the testator to execute the will, the learned authors have observed as follows (p. 3): " 'To appoint an executor,' says Swinburne, 'is to place one in the stead of the testator, who may enter to the testator's goods and chattels, and who hath action against the testator's debtors, and who may dispose of the same goods and chattels, towards the payment of the testator's debts, and performance of his will '". So far as the administrators are concerned, the learned authors have pointed out at p. 235, that the office of an administrator resembles that of an executor, but since he has not been selected by the deceased, he is, in general, oblig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the Legislature to give an artificial status of an individual by specifically enacting in sub-s. (2) of s. 19A that the executor or executors shall, for the purposes of the Act, be treated as an individual. Sub-ss. (4) and (5) of s. 19A give a clear indication that s. 19A will be attracted only in a case where the deceased has left a will. Sub-s. (5) of s. 19A refers to the period of time during which the provisions of s. 19A can be effectively applied. While sub-s. (4) provides that an executor shall be assessed separately in respect of the net wealth of the deceased and his own net wealth, for which period this separate assessment in respect of the net wealth of the deceased is to be made is expressly indicated in sub-s. (5). Sub-section (5) provides that separate assessment shall be made under s. 19A in respect of the net wealth as on each valuation date as is included from the date of death of the deceased to the date of complete distribution to the beneficiaries of the estate according to their several interests. This is the period of time for which s. 19A operates. The provisions of sub-s. (5) also indicate that it will operate in a case where the estate is to be distribute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not been able to find anything in the provisions of the Indian Succession Act which has the effect of divesting an heir who succeeds by inheritance to the property left by his father of any rights, even though it may be possible to obtain letters of administration in respect of the estate of the deceased. The construction which we have placed on ss. 19 and 19A of the Act also finds support from the decision of the Madras High Court in A. F. Harvey Ltd. v. CWT [1977] 107 ITR 326. One Shri Harvey had died on 28th March, 1957, and he had executed a will on 30th November, 1956, appointing five executors and trustees of his will and one of them was his wife. The will was proved in England and the probate was granted in England. Harvey held 90,000 ordinary shares of the company incorporated in India called M/s. A. F. Harvey Ltd. The administration of the estate devolved on and vested in the executors from the date of death of the testator. The department wanted to assess the value of 90,000 shares in the hands of the executors for the assessment year 1957-58 under the Act. The executors' contention was that even for the assessment year 1957-58, they could not be taxed in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re an assessee dies having executed a will and appointed an executor or executors. If he had died intestate, the estate would have gone to his heirs, and, therefore, it is in the hands of the heirs that the assessment will have to be made and not in the hands of anybody else. Consequently, section 19A is confined only to a case where an assessee dies after executing a will and appointing an executor or executors. In such case section 19A provides for the assessment of the estate of the deceased in the hands of the executor or executors till the administration is completed. A specific provision has been made in this section itself for the exclusion of a part of the assets of the deceased if the executor or executors had handed over that part to the persons who were entitled to it under the terms of the will. Hence, this section 19A which creates a special machinery for the purpose of assessing an executor or executors in respect of an estate of a deceased having come into force with effect from April 1, 1965, has no application to the present case." The view which we have taken with reference to the provisions of s. 19 is in accord with the view taken by this court in Jamnadas' ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd other legal representatives were made liable to pay such wealth-tax for that relevant financial year from out of the estate left by the deceased person." Here again, these observations are based on the assumption that wealth-tax is recoverable for the financial year in which the person has died and that there is a legal fiction in s. 19. The decision in Jamnadas' case [1965] 56 ITR 648 (Bom) shows that this view was almost wholly influenced by the construction placed by the Supreme Court on s. 24B of the Indian I.T. Act, 1922, in the case of CIT v. Amarchand N. Shroff [1963] 48 ITR (SC) 59, because at p. 654 of the report, the Division Bench had observed that the provisions of s. 19 of the Act and s. 24B of the Indian I.T. Act, 1922, were similar and there was no substantial difference between the provisions of sub-s. (1) of both these sections. With respect to the learned judges who decided Jamnadas' case [1965] 56 ITR 648 (Bom), it appears that the distinguishing feature between the provisions of the Indian I.T. Act and the provisions of the Act was overlooked when support was sought from the construction placed on s. 24B of the Indian I.T. Act, 1922, in Amarchand N. Shroff' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 648 (Bom) was considered by the Calcutta High Court also in CWT v. Executors to the Estate of Sir E. C. Benthal [1977] 106 ITR 57, and in that context the difference between the provisions of s. 24B of the Indian I.T. Act, 1922, and s. 19(2) of the Act was pointed out as follows (p. 63): " Though the language used in section 24B of the Income-tax Act, 1922, and section 19(2) of the Wealth-tax Act are similar, the subject matter of the charge and the scheme of these two Acts being totally different, these two sections cannot, in our opinion, operate on the same field. These two sections must be read and understood in their own context and must also be construed in the light of the respective schemes of the respective Acts including the respective charges under the respective Acts. These two Acts are not in pari materia as held by this court in the case of CIT v. Balai Chandra Paul [1976] 105 ITR 666 (Cal), and, accordingly, I am not inclined to be inspired by the above decision of the Supreme Court (in Amarchand N. Shroff's case [1963] 48 ITR (SC) 59), in construing s. 19(2) of the Wealth-tax Act." The Calcutta High Court in that case agreed with the decision of the Madras ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , his deceased father. If he recovers any debts he does so because the right to recover the debt has vested in him by inheritance and not as an administrator. There is thus no question of the assessee claiming the benefit of the extended meaning of " executor " in the proviso in s. 19A of the Act. For the same reason, we must also reject the argument based on the authorities which deal with the executor shedding the character of an executor and assuming the character of a trustee, on which reliance was placed by Shri Dastur. The three decisions which were relied upon were: (1) Estate of J. K. Dubash v. CIT [1948] 16 ITR 90 (Bom), (2) Asit Kumar Ghose v. Commr. of Agrl. I.T. [1952] 22 ITR 177 (Cal) and (3) Administrator-General of West Bengal for the Estate of Raja P.N.Tagore v.CIT [1965] 56 ITR 34 (SC). On the basis of these authorities, it was sought to be contended that as long as the administration of the estate of the deceased was not complete, the assessee cannot be said to have shed the character of administrator or a person administering the estate, and, in any case, according to the learned counsel, at least for the first year following the death of the deceased when estate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the estate had to be taxed in the hands of the mother-in-law, in her capacity as the administrator of the estate. On those facts the Division Bench held that the estate was being administered by the mother-in-law and having regard to the provisions of s. 168, the income of the estate must be taxed in her hands. It is difficult for us to see how this decision is of any avail to the assessee. We have already pointed out that s. 19A is a special provision, and unless a person falls within the provisions of s. 19A, it will not be possible to give him the benefit of s. 19A, the operation of which, we have found, is attracted only in a case where the deceased has left a will. No argument can, therefore, be advanced in favour of the contention raised by the assessee on the basis of the decision in Mrs. Usha D. Shah's case [1981] 127 ITR 850 (Bom). Having regard to the discussion made earlier, we must hold that the assessee was not entitled to the benefit of the special provision in s. 19A of the Act, and questions Nos. 2 and 4 will, therefore, have to be answered in the affirmative and against the assessee. Coming to questions Nos. 1 and 3, the answer is apparent from the definit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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