TMI Blog1974 (7) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... essed of considerable movable properties acquired by his personal skill and labour and held in his individual capacity. Besides, Balabhai had one-half share in the coparcenary properties belonging to the Hindu undivided family of which be was the karta. The remaining one-half share in the said coparcenary properties belonged to one Sakarlal Balabhai, father of the assessee and son of Balabhai. On October 6, 1956, Balabhai executed a will which in substance provided that after discharging all debts, liabilities and obligations and after meeting expenses of illness, obsequial ceremonies and disbursing charities out of his self-acquired properties, the said properties as also his right, title and interest in the coparcenary properties would on his death devolve upon his two grandsons (the assessee and his brother) and that they would become entitled to use and enjoy the same. It may be stated that no person was named as administrator or executor in the will and that the provision in the will was that the legatees themselves should take possession of the properties of the testator on his death. Balabhai died on December 31, 1957, leaving behind as his next-of-kin a son (Sakarlal), th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Share in the Total year properties H.U.F. wealth Rs. Rs. Rs. 1963-64 3,68,852 6,97,236 10,66,088 1964-65 3,55,603 6,36,195 9,91,798 ---------------------------------------------------------------------------------------------------------------------------------------------- The assessee is individually also liable to be assessed to wealth-tax and in the course of proceedings for assessment to wealth-tax for the two assessment years in question the Wealth-tax Officer computed the net wealth of the assessee by including therein the assessee's one-half share in the estate of deceased Balabhai to which he became entitled under the will. The net wealth of the assessee for the two assessment years in question was accordingly determined after adding amounts of Rs. 5,33,044 and Rs. 4,95,899 respectively, being one-half of the value of the net wealth of deceased Balabhai as determined in the protective assessment proceedings for the said two years, and wealth-tax was levied accordingly. It may be stated that the Wealth-tax Officer took the above-mentioned step on the view that one-half share of the assessee in the estate left behind Balabhai passed to him immediately on the deat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uary legatees but were absolute legatees and took the estate of the deceased subject to all rights and liabilities of the deceased. The Tribunal was of the view that though the father of the assessee was actually administering the estate of the deceased, he was doing so for and on behalf of the assessee and his brother and by reason of that circumstance alone the vesting of the properties could not be deemed to have been postponed till the administration was completed and the liability of the assessee to pay wealth-tax could not be said not to arise till such time as the debts and liabilities of the deceased were discharged. In view of these findings, the Tribunal allowed the appeal and set aside the order passed by the Appellate Assistant Commissioner and restored that passed by the Wealth-tax Officer. The assessee was obviously aggrieved by the decision of the Tribunal and at his instance the Tribunal has stated a case in respect of the following three questions : " (1) Whether, on the facts and circumstances of the case, the Tribunal was correct in holding that the assessee has become the absolute owner of the legacy left by Shri Balabhai Damodardas in accordance with his wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he expression " net wealth " has been defined in section 2(m) of the Act as under : " (in) 'net wealth' means the amount by which the aggregate value computed in accordance with the provisions of this Act of all the assets, wherever located, belonging to the assessee on the valuation date, including assets required to be included in his net wealth as on that date under this Act, is in excess of the aggregate value of all the debts owed by the assessee on the valuation date other than-- (i) debts which under section 6 are not to be taken into account ; (ii) debts which are secured on, or which have been incurred in relation to, any property in respect of which wealth-tax is not chargeable under this Act ; and (iii) the amount of the tax, penalty or interest payable in consequence of any order passed under or in pursuance of this Act or any law relating to taxation of income or profits, or the Estate Duty Act, 1953 (34 of 1953), the Expenditure-tax Act, 1957 (29 of 1957), or the Gift-tax Act, 1958 (18 of 1958),-- (a) which is outstanding on the valuation date and is claimed by the assessee in appeal, revision or other proceeding as not being payable by him, or (b) which, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vant valuation dates. Now, in order to determine these points, reference will have to be made first to the will executed by deceased Balabhai. A copy of this will which is in the Gujarati language is annexed to the statement of case as annexure " G " and an English translation thereof is annexed as annexure " H ". We, however, found, at the hearing of the reference, that the English translation was not accurate and at our suggestion the revenue produced a fresh English translation of the will which has been taken on record of the reference with the consent of the assessee and marked exhibit If. In the said will, after mentioning that the testator was possessed of separate movable and immovable properties and that he also had " right, title and interest " in the movable and immovable properties of the joint family, the testator proceeded to make disposition of his properties in the following words : " 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, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in accordance with the provisions of the Indian Succession Act, 1925, or any other law for the time being in force and applicable to Hindus. As I we shall presently show, the devolution of interest in coparcenary properties in this case would be governed by the provisions of section 6 of the Hindu Succession Act and reference may, therefore, be made to the provisions of the said section. The main part of the said section provides that when a male Hindu dies after the commencement of the Act, having at the time of his death an interest in a Mitakshara coparcenary property, his interest in the said property shall devolve by survivorship upon the surviving members of the coparcenary and not in accordance with the Act. The proviso to the said section, however, carves out an exception and provides that if the deceased had left him surviving a female relative specified in class I of the Schedule or a male relative specified in that class, who claims through such female relative, the interest of the deceased in the Mitakshara coparcenary property shall devolve by testamentary or intestate succession, as the case may be, under the Act and not by survivorship. As already stated, the testato ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -in-common each having defined share in the properties which belonged to the Hindu undivided family at the date of the death of the coparcener. The heirs of the deceased coparcener would also take the share of the deceased coparcener in the properties of the Hindu undivided family between themselves as tenants-in-common because as pointed out by the Privy Council in Jogeswar Narain Deo v. Ram Chandra Dutt [1896] ILR 23 Cal 670 (PC) " the principle of joint tenancy appears to be unknown to Hindu law, except in the case of coparcenary between the members of an undivided family ". This conclusion is fortified by the provisions of section 19 of the Hindu Succession Act, 1956, which provides that if two or more heirs succeed together to the property of an intestate, which would include the interest of a deceased coparcener in coparcenary properties, then, they shall take the properties as tenants-in-common and not as joint tenants. It is true that the reference there is to the property of an intestate but the principle underlying the same can be invoked also in the case of heirs taking together under a will. The result, therefore, is that each of the heirs on the one hand and the Hindu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 2(e) of the Act defines " assets " to include property of every description, movable or immovable, but does not include certain categories of properties with which we are not concerned. This definition, which is not exhaustive, is of wide amplitude and there is no cogent reason as to why the interest which the assessee acquired in the coparcenary properties under the will cannot be included amongst the assets of the assessee. The assessee became entitled to a specified undivided share in each and every item of property held by the Hindu undivided family at the time of the death of the testator. He could have alienated his interest in the said properties and such interest could also have been attached and sold in execution of a decree against him. The legacy vested in him not only in interest but also in possession and he became a tenant-in-common in respect of the coparcenary properties along with his co-heir and the surviving members of the Hindu undivided family with all the rights and liabilities flowing from such status. We are of the opinion, therefore, that the interest which devolved upon the assessee under the will in the coparcenary properties was an asset which c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Attorney-General [1897] AC 11 ; 1 EDC 73 (HL) and in R v. Income-tax Special Commissioners : Ex parte Dr. Barnado's Homes [1921] 7 TC 646, 666 (HL) and on the decision of the Supreme Court in Administrator-General of West Bengal v. Commissioner of Income-tax [1965] 56 ITR 34 (SC). The argument urged on behalf of the assessee, attractive though it might appear at first sight, is not well-founded and though some of the premises on which it is founded cannot be disputed, the ultimate conclusion sought to be drawn therefrom is not supportable. In order to examine the validity of the argument and determine the nature and the character of the interest which the assessee acquired under the will in the separate properties of the testator, reference will have to be made to some of the provisions of the Indian Succession Act, 1925. Before we do so, however, it may be stated that it is not in dispute that the only administration, if any, of the estate left by deceased Balabhai which remains to be done, or, to put it differently, the only payment to be made or liability to be discharged out of the separate properties of the deceased, was the payment of the balance amount of estate duty for w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appointed an executor, the universal or residuary legatee may be admitted to prove the will and letters of administration with the will annexed may be granted to him of the whole estate or of so much thereof as may be unadministered. Section 233 provides that when a residuary legatee who has a beneficial interest survives the testator but dies before the estate has been fully administered, his representative has the same right to administration with the will annexed as such residuary legatee. Section 332 provides that the assent of the executor or administrator is necessary to complete a legatee's title to his legacy. Section 336 provides that when the executor or administrator is a legatee, his assent to his own legacy is necessary to complete his title to it in the same way as it is required when the bequest is to another person and his assent may, in the like manner, be express or implied. Assent may be implied if in his manner of administering the property he does any act which is referable to his character of legatee and is not referable to his character of executor or administrator. Section 336 says that the assent of the executor or administrator to a legacy gives effect t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forward such property would vest in him in possession as owner. If the residuary legatee is himself the executor or administrator, he may take possession of the estate but such possession would not be referable to his character of legatee and his assent, express or implied, in his capacity as executor or administrator would be necessary on completion of the administration to invest him with title to his own legacy. This, however, does not mean that pending final administration or a partial distribution no interest whatever vests in the residuary legatee so far as the residue of the estate of the testator is concerned. Though the residuary legatee is not entitled to immediate possession of the testator's estate or any part thereof and has no right to claim any interest, whether legal or equitable, in any specific asset or each and every asset of which the estate consists, the right to receive the clear residue, that is, what remains of the estate after satisfying debts and legacies, becomes vested in the legatee on the testator's death unless a contrary intention appears by the will and the said right even passes to the legatee's representatives if he dies before the distribution an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this context that in Commissioner of Wealth-tax v. Bhogilal Maganlal Shah [1968] 69 ITR 288 (Guj), a Division Bench of this court has held that a contingent interest given to the assessee in that case in the corpus of the trust property together with all accretions thereto was an asset within the meaning of section 2(e) of the Act. The case of a residuary legatee in whom the surplus of the estate is vested in interest right from the day of the death of the testator stands on a much higher footing and on no account would it be possible to hold that his interest would not be comprehended within the meaning of the word " assets " as given in section 2(e) of the Act. In Pandit Lakshmi Kant Jha v. Commissioner of Wealth-tax [1973] 90 ITR 97 (SC) the Supreme Court held that the right to compensation acquired by an assessee whose estate or tenure vested in the State under the provisions of a statute was a vested right and that though the amount of compensation may not have been determined before the relevant valuation date, there would be no justification for the exclusion of the compensation from his assets. This decision also supports the view which we have taken since it proceeds on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to claim repayment of the income-tax deducted from such income on the ground that it was paid on behalf of the charity. This decision again rests upon the view that, prior to the ascertainment of the residue, the charity could not claim title to any of the items of the testator's property out of which its legacy was ultimately payable or to the income arising therefrom. These two cases, however, do not support the proposition that pending final administration and distribution, the residuary legatee had no title or interest at all in the residue. Indeed, the decision in Sudeley's case [1897] AC 11 ; 1 EDC 73 (HL) shows that in the case of the death of a residuary legatee before he actually comes into possession of his legacy, his estate will be liable to pay duty upon the value of his interest in the residue ascertained as best as may be in the circumstances of the case. This is how these two decisions have been understood even in England as is apparent from the decision of the Court of Appeal in Cunliffe-Owen, In re mountain v. Inland Revenue Commissioners [1953] Ch 545 ; [1953] 2 All ER 196, 200 (CA), where Lord Evershed M.R., after referring to the said two cases, observed : " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the administration of the estate was not completed in the relevant accounting periods) that the income was specifically receivable on behalf of the five sons of the testator, that their shares in the said income were definite and determinate and that the assessment was, therefore, required to be made under section 41 of the Indian Income-tax Act, 1922. The Supreme Court held that, as the administration of the estate was not completed, the Administrator-General received income of the estate on his behalf and not on behalf of the sons who were residuary beneficiaries. A share of the residue does not belong to the beneficiary until it is ascertained either in whole or in part by transfer or assent to him or by appropriation and that, therefore, section 41 did not apply. It would appear from the foregoing that the case was similar to that of Dr. Barnado's Homes [1921] 7 TC 646 (HL) and the true ratio of the decision is that until the estate is fully administered and the net residue is ascertained, the residuary legatee has no property in any specific investments forming part of the estate or in the income from any such investment and both the corpus and income are the property of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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