TMI Blog1964 (10) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeals by certificates under section 66A(2) of the Indian Income-tax Act, 1922, against the judgment of the High Court at Calcutta, answering two questions referred to it by the Income-tax Appellate Tribunal against the appellant. The two questions are : " 1. Whether, on the facts and in the circumstances of the case, the assessments on the Administrator-General of West Bengal as an individual and not as representing the shares of the various beneficiaries under the will of the late Raja P. N. Tagore separately was in accordance with law ? 2. If the answer to question No. 1 be in the affirmative, then whether, on the facts and in the circumstances of the case, the assessment of the said Administrator-General at the maximum rate was legal ? " The facts and circumstances referred to are set out in the statement of the case by the Appellate Tribunal and are as follows. One Raja Profulla Nath Tagore died on July 2, 1938, leaving an elaborate will dated March 14, 1927, by which certain legacies were left to specified persons and institutions, the residue being given to five sons. The residue was disposed of thus by clause 81 of the will : " Save and except the legacies that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, and their shares in the said income were definite and determinate. The Income-tax Officer rejected the claim for the assessment year 1950-51 on the ground that " the Administrator-General of West Bengal is only an executor of the estate of Raja P. N. Tagore and that the execution is not yet complete. Under the circumstances the question of the beneficiaries does not arise and the Administrator-General himself is assessable as executor to the estate of P. N. Tagore. " He passed a similar order in respect of assessment year 1951-52. The Appellate Assistant Commissioner upheld the orders of the Income-tax Officer. Following the principles laid down in the decisions in V. M. Raghavalu Naidu Sons v. Commissioner of Income-tax and Excess Profits Tax and Asit Kiumar Ghose v. Commissioner of Agricultural Income-tax, he held that the " levy of tax on the separate individual incomes of the beneficiaries can be made only when the administration of the estate has been completed, and the residue of the estate has been ascertained. " It was conceded before him that the administration of the estate was not completed till the end of the accounting year (1950-51). The Appellate Tribunal also r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether the actual sum, which each son would get, is variable or not. Income may be variable but the shares of the sons are fixed. In this connection, he relied on the decision in Birendra Kumar Datta v. Commissioner of Income-tax. He further said that section 41 was mandatory and if the proviso to section 41 did not apply, the Income-tax Officer was bound to assess the appellant under section 41. The learned Attorney-General, on behalf of the revenue, submit that section 41 did not apply at all because, in the facts and circumstances of the case, the appellant did not receive the income on behalf of the five sons but received it like an executor. He said that an executor was not mentioned in section 41 and was assessable under sections 3 and 4 of the Act. In the alternative, he argued that the share of the sons were indeterminate. As we are inclined to accept the first submission of the learned Attorney-General, we need not express any opinion on the question whether the shares of the five sons were indeterminate or not, within the proviso to section 41. Section 41 reads thus : " 41. Court of Wards, etc.--- (i) In the case of income, profits or gains chargeable under this Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs that might be out of the income of the estate would be received by then finally, not as their income but as part of the residue. In England, apart from statutory provisions, a residuary beneficiary is not regarded as taxable on income of an estate in the course of administration. A share of residue does not belong to the beneficiary until it is ascertained either in whole or part by transfer or assent to him or by appropriation (Wheatcroft on Law of Income Tax, Surtax and Profits Tax, section 1-1104), The decision in R. v. Income Tax Special Commissioners : Ex Parte Dr. Barnado's Homes, supports the contention of the learned Attorney-General. The facts may be taken from the headnote. " Mr. Denzil Thomson died on November 15, 1914, leaving the residue of his estate to Dr. Barnado's Homes National Incorporated Association. The testator's nextof-kin contested the will and the proceedings were compromised by the Association making over to the next-of-kin one-third of the residuary estate. The proceedings delayed the division of the residuary estate, and the investments constituting or representing the same remained under the control of the executors until May, 1961, between wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, but they were not trustees of any part of it for the charity. There had been no creation of a trust in favour of the charity in respect of this income, it was never paid over to the charity as income. What was ultimately paid over on the close of the administration was the share of the whole estate, consisting of capital and accumulated income, which fell to the charity. The executors, not the charity, were the recipients of this income, and there is no relation back in the case of the bequest of a residue. If no right of deduction at the source had existed it is the executors and the executors only who could have been made liable for the tax. Viscount Cave put the point thus : " When the personal estate of a testator has been fully administered by his executors and the net residue ascertained, the residuary legatee is entitled to have the residue as so ascertained, with any accrued income transferred and paid to him ; but until that time he has no property in any specific investment forming part of the estate or in the income from any such investment, and both corpus and income are the property of the executors and are applicable by them as a mixed fund for the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X
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