Post-death professional fee arrears are not estate income; they are taxed, if at all, as deemed income on receipt.

Arrears of professional fees received after the death of the professional formed part of the estate as assets, but not income of the estate for section 168 purposes. Section 168 applies only to income accruing to the estate, while section 176(4) separately deems post-discontinuance receipts to be income of the recipient in the year of receipt if they would have been assessable in the deceased's hands before death. Because the two provisions operate in different fields, the arrears could not be assessed as professional income of the executor as part of estate income and were taxable, if at all, only under section 176(4).

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Issues: Whether arrears of professional fees received by the executor after the death of the deceased could be included in the income of the estate under section 168 of the Income-tax Act, 1961, or were chargeable only in the hands of the recipient under section 176(4).

Analysis: The arrears of professional fees due to the deceased on the date of death formed part of the estate, but they did not constitute income of the estate. Section 168 applies only to the income of the estate of a deceased person and not to the estate itself or to a part of the assets recovered later. Section 176(4) creates a deeming fiction where, on discontinuance of the profession by death, any sum received thereafter is treated as the income of the recipient in the year of receipt if it would have been assessable in the hands of the deceased had it been received before death. The two provisions operate on different fields, and the arrears could not be clubbed with the estate income and assessed in the hands of the executor as professional income.

Conclusion: The arrears of professional fees were not assessable as income of the estate under section 168. They were taxable only as deemed income in the hands of the recipient under section 176(4).

Final Conclusion: The reference was answered against the Revenue and the assessee succeeded on the question referred.

Ratio Decidendi: Amounts realised after death in respect of the deceased's professional fees are not income of the estate under section 168; such receipts fall to be taxed, if at all, only as deemed income of the recipient under section 176(4) in the year of receipt.

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