TMI Blog1963 (12) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... ive which would, but for the death of the deceased, have been received by such deceased person, is to be regarded for the purpose of assessment as the personal income of the legal representative. To assess tax on such receipts on the footing that it is the personal income of the legal representative is to charge tax not in accordance with the provisions of the Act. We, therefore, agree with the High Court, though for somewhat different reasons. Appeal dismissed. - - - - - Dated:- 2-12-1963 - Judge(s) : A. K. SARKAR., M. HIDAYATULLAH., J. C. SHAH JUDGMENT The judgment of the court was delivered by SHAH J.--Henry Gannon who was a registered holder of 2,674 shares of Gannon Dunkerley and Company--a private limited company with its registered office in Bombay--died on May 13, 1945, having made and published a will disposing of extensive estate in the United Kingdom and in British India. The National Bank of India Ltd. obtained probate of Gannon's will in the United Kingdom and appointed the respondent, James Anderson, its attorney to administer the estate in British India. Anderson applied for and obtained in India on August 14, 1946, letters of administration duran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and after processing the amount under section 18(5) included it in the total income of Anderson and levied tax thereon at the appropriate rate. Anderson's appeals against the order of the Income-tax Officer to the Appellate Assistant Commissioner and to the Income-tax Appellate Tribunal, Bombay, were unsuccessful. At the instance of Anderson the following questions were referred by the Tribunal to the High Court of Bombay under section 66(1) of the Income-tax Act : " (1) Whether on the facts and in the circumstances of the case the assessment made on Mr. James Anderson, Administrator to the estate in India of Mr. Henry Gannon (deceased), is valid in law ? If the above question is answered in the affirmative, (2) Whether on the facts and in the circumstances of the case the dividends of Rs. 61,051 and Rs. 3,73,099 deemed to have been distributed on May 26, 1947, and December 22, 1947, respectively under section 23A of the Income-tax Act were assessable in the hands of the applicant? " The High Court answered the first question in the negative and declined to answer the second question. With special leave, the Commissioner of Income-tax, Bombay, has appealed to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticles of the company which create those rights and obligations. The legal representative of a deceased person cannot vote on behalf of the shareholder and may not become a director of the company on the strength of the representation alone. Again by the express provision contained in section 35 of the Indian Companies Act, 1913, a transfer of the share or other interest of a deceased member by his legal representative although he is himself not a member is as valid as if he were a member at the time of the execution of the transfer. This implies that the legal representative does not acquire in all cases the rights of a shareholder of a company in respect of shares of which the name of the deceased was registered as holder. But if the estate of a shareholder of a company is by virtue of the articles of the company liable in respect of calls upon shares whether made during the lifetime of the holder or after his death, the legal representative is obliged to satisfy the calls in his representative character. This obligation arises not because the legal representative becomes, by virtue of probate or letters of administration, a shareholder in place of the person whose estate is ves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied after the commencement of the financial year but before the income of the previous year was assessed, and it was held that the executors under the will of the taxpayer were not liable to pay tax on receipt of income due to the deceased, notwithstanding that he died while assessment proceedings were pending, because the proceedings could not be continued and the assessment could not be made after the taxpayer's death. To rectify the lacuna in the machinery of assessment the Legislature enacted section 24B, by the Indian Income-tax (Second Amendment) Act (18 of 1933). The first sub-section, of section 24B provided : "Where a person dies, his executor, administrator or other legal representative shall be liable to pay out of the estate of the deceased person to the extent to which the estate is capable of meeting the charge the tax assessed as payable by such person, or any tax which would have been payable by him under this Act if be had not died." In interpreting that enactment this court held in a recent case, Commissioner of Income-tax v. Amarchand N. Shroff that by the incorporation of section 24B the Legislature has extended the legal personality of a deceased perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment. It cannot be said that they were income which may be deemed by fiction to have been received by the dead person and therefore they are not liable to be taxed as income of the deceased, Amarchand, and are not liable to be taxed in the hands of the heirs and legal representatives who cannot be deemed to be assessees for the purpose of assessment in regard to those years", and on the latter part of the opinion sought to raise two arguments : (1) that even if after the expiry of the year of account receipts which if the person earning had not died would have been treated as his income, ceased to be liable to assessment as income of the deceased, they could still be taxed as his income in the bands of the legal representatives, and (2) that where the income was notional as under section 23A the legal personality of the deceased must be regarded as extended to the end of the year in which such notional income must be deemed to have been received by the legal representatives of the deceased. The first argument is plainly inconsistent with what was decided in Amarchand Shroff's case. In that case the court held that the receipts by the heir or legal representative for professio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailed to set up the procedure to assess such income, the courts cannot supply it. The expression " assessee " in section 2(2) as substituted by the Indian Income-tax (Amendment) Act (25 of 1953) with effect from April 1, 1952, means a person by whom income-tax or any other sum of money is payable under the Act, and includes every person in respect of whom any proceeding under this Act has been taken for the assessment of his income or of the loss sustained by him or of the amount of refund due to him. By section 3 where income-tax is chargeable for any year at any rate or rates prescribed by the Act of the Central Legislature, tax at that rate shall be charged for that year in accordance with and subject to the provisions of the Act in respect of the total income of the previous year of every individual, Hindu undivided family, company, and local authority, and of every firm and other association of persons or the partners of the firm or the members of the association individually. The charge to income-tax has therefore to be in accordance with, and subject to the provisions of the Act, and the Legislature has not provided that the income received by a legal representative which wo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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