Residuary estate assessment: beneficiary's share becomes taxable once the residue is ascertained, despite ongoing administration.

Section 168 of the Income-tax Act, 1961 fastens liability on the person administering a deceased person's estate until complete distribution, but the residuary legatee's share may be assessed once the residue has been ascertained and has taken concrete shape. The text explains that, where estate duty liability was substantially discharged and only payment remained, the estate could be treated as capable of being handed over to beneficiaries and administration as effectively complete for the relevant assessment years. In that situation, the beneficiary's share of estate income was taxable in his hands despite pending formal distribution.

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Issues: Whether, on the facts of the case, the residuary share in the estate of the deceased testator had been ascertained so as to permit assessment of the assessee's share of the estate income in his hands notwithstanding section 168 of the Income-tax Act, 1961.

Analysis: Section 168 fastens liability on the executor or other person administering a deceased person's estate during the period up to complete distribution of the estate. The inclusive definition of "executor" in the Explanation, read with the provisions relating to legal representatives, shows that the Act contemplates assessment of the person actually administering the estate. However, the principle governing residuary legatees is distinct: once the residue has been ascertained, the beneficiary's share may be treated as vested even though formal distribution is pending. On the facts, the estate duty liability was substantially discharged and the only remaining step was payment of that liability, which did not prevent the residuary estate from having taken concrete shape. The estate, therefore, was capable of being handed over to the beneficiaries, and the administration could be treated as complete for the relevant assessment years.

Conclusion: The assessee's share of the estate income was taxable in his hands; the question was answered in the negative, in favour of the Revenue and against the assessee.

Ratio Decidendi: Where the residuary estate has been ascertained and has taken concrete shape, assessment of the beneficiary's share is not barred merely because the estate continues to be administered by another person under section 168 of the Income-tax Act, 1961.

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