Executors' estate income applied to testamentary expenses remains taxable as application of income, not diversion at source.

Amounts received by executors under a will and then applied to Sradh expenses and probate costs were treated as income applied after receipt, not as income diverted at source by an overriding title. A testamentary direction that such outgoings be paid from income did not prevent the income from accruing to the executors for assessment. The probate expense was likewise not excluded from chargeable income. On tax deducted at source, the executors were not entitled to any further credit because no separate tax burden had been imposed on them for that amount. The assessment was upheld and no relief was granted.

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Issues: (i) Whether the amounts spent by the executors on the testator's Sradh and the probate costs were to be excluded from chargeable income as amounts diverted before receipt or treated as application of income after receipt. (ii) Whether the cost of obtaining probate, though directed by the will to be paid out of income, could be left out of the executors' income for tax purposes. (iii) Whether the executors were entitled to full credit for tax deducted at source in respect of securities and dividends.

Issue (i): Whether the amounts spent by the executors on the testator's Sradh and the probate costs were to be excluded from chargeable income as amounts diverted before receipt or treated as application of income after receipt.

Analysis: The amounts were received as part of the estate income by the executors and were thereafter applied in discharge of obligations imposed by the will. That position did not amount to a diversion of income by an overriding title. The executors stood in the shoes of the testator and merely applied income in the manner directed by him.

Conclusion: The amounts were not excludible on the footing of diversion by overriding title and were correctly treated as application of income. The conclusion was against the assessee and in favour of Revenue.

Issue (ii): Whether the cost of obtaining probate, though directed by the will to be paid out of income, could be left out of the executors' income for tax purposes.

Analysis: The probate expense was also an outgoing to be met out of the income that came into the hands of the executors. A testamentary direction to pay an expenditure out of income does not convert that expenditure into a prior charge that prevents the income from accruing to the executors for assessment purposes.

Conclusion: The probate costs could not be excluded from chargeable income. The conclusion was against the assessee and in favour of Revenue.

Issue (iii): Whether the executors were entitled to full credit for tax deducted at source in respect of securities and dividends.

Analysis: The executors were not in fact charged with any tax deducted at source. The sums from securities and dividends were taken gross only for working out the total income, and the assessment did not impose a separate burden for tax already deducted at source.

Conclusion: No further credit was due. The conclusion was against the assessee and in favour of Revenue.

Final Conclusion: The assessment was upheld in substance, and the executors obtained no relief on the questions decided.

Ratio Decidendi: Amounts received by executors under a will and applied in accordance with testamentary directions are application of income, not income diverted at source by an overriding title.

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