Intestate succession and estate income: section 168 does not apply, while heirs are taxed on their respective shares.

Section 168 applies to the estate of a deceased person only in testamentary administration and does not extend to intestate succession. Where the deceased leaves no will, the estate devolves directly on the heirs, and a person merely managing the property in fact is not assessable as an executor or administrator under that provision. The resulting income from co-owned estate property is then assessable in the hands of the heirs according to their respective shares under section 26. On that reasoning, representative assessment under section 168 was unavailable and individual assessment of heirship income was permissible.

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Issues: (i) Whether income arising after the death of the deceased could be assessed under section 168 of the Income-tax Act, 1961 in the hands of the executor or administrator where the succession was intestate. (ii) Whether, on the application of section 168, there was any scope for assessment under section 26 of the Income-tax Act, 1961 in the hands of the heirs as co-owners of the estate.

Issue (i): Whether income arising after the death of the deceased could be assessed under section 168 of the Income-tax Act, 1961 in the hands of the executor or administrator where the succession was intestate.

Analysis: Section 168 is a special provision dealing with the estate of a deceased person in the hands of an executor and, by the Explanation, extends the expression to an administrator or other person administering the estate. That provision applies where the deceased has left a will and the estate is being administered in a testamentary succession. A person merely managing the estate in fact, without appointment in that capacity and where the succession is intestate, is not covered by the section. In intestacy, the estate devolves on the legal heirs and there is no basis for representative assessment under section 168.

Conclusion: The income was not assessable under section 168 in the hands of the alleged administrator in a case of intestate succession.

Issue (ii): Whether, on the application of section 168, there was any scope for assessment under section 26 of the Income-tax Act, 1961 in the hands of the heirs as co-owners of the estate.

Analysis: Since section 168 was inapplicable, the estate had to be treated as having devolved upon the heirs in their individual shares. Where the property is held by co-heirs as tenants-in-common, the income from the property is assessable according to their respective shares. The existence of undivided heirship did not create a representative assessment under section 168, and the proper provision for taxing the property income was section 26 in the hands of the individual heirs.

Conclusion: Assessment under section 26 in the hands of the heirs according to their respective shares was permissible.

Final Conclusion: The reference was answered against the assessee and in favour of the Department by holding that section 168 does not apply to intestate succession and that the heirs' share income is assessable individually.

Ratio Decidendi: Section 168 of the Income-tax Act, 1961 applies only to testamentary estates under administration and does not extend to intestate succession, where the estate devolves directly on the heirs and the income is assessable in their individual hands according to their shares.

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