Post-death income cannot be taxed in a deceased person's hands; pre-death and post-death accrual must be separately examined.

Section 159 limits a deceased person's tax liability to income that accrued, arose, or was received before death, so post-death income cannot be assessed in the deceased's hands through a legal representative. Income first arising after death belongs to the estate or other proper successor under the relevant post-death assessment provision. Interest and dividend income also require item-wise examination, because accrual may differ by period and must be split between pre-death and post-death income for correct assessment of the liable person. Fresh factual verification was therefore necessary to apportion the taxable income correctly.

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Issues: (i) Whether income that accrued or arose after the death of the assessee could be assessed in the hands of the deceased through his legal representative under section 159 of the Income-tax Act, 1961. (ii) Whether the items of interest and dividend income required item-wise examination to segregate income accruing during the lifetime of the deceased from income accruing after death, so as to assess the proper person under sections 159 and 168.

Issue (i): Whether income that accrued or arose after the death of the assessee could be assessed in the hands of the deceased through his legal representative under section 159 of the Income-tax Act, 1961.

Analysis: Section 159 extends the liability of a deceased person only to the extent of sums for which the deceased would have been liable had he survived. The legal fiction is confined to income that accrued, arose, or was received during the previous year in which death occurred. Income which came into existence only after death cannot be fastened on the deceased through the legal representative; such income belongs to the estate or the executor, as the case may be, and is assessable under the relevant provision governing post-death income.

Conclusion: The income arising after death was not assessable in the hands of the deceased through the legal representative; the assessee was entitled to separate treatment of such income.

Issue (ii): Whether the items of interest and dividend income required item-wise examination to segregate income accruing during the lifetime of the deceased from income accruing after death, so as to assess the proper person under sections 159 and 168.

Analysis: Interest may accrue day to day, and dividend may become taxable by reference to the date of declaration or accrual. Accordingly, each item had to be examined to determine what portion, if any, accrued or arose before death and what portion accrued after death. The authorities below had clubbed the returns without such analysis, which was not justified. The matter therefore required factual re-examination for proper apportionment between the deceased's liability and the estate's liability.

Conclusion: Item-wise examination was and the matter was remitted for fresh determination of the respective taxable incomes.

Final Conclusion: The legal position was settled in favour of separate assessment of pre-death and post-death income, but the computation required fresh item-wise verification by the assessing authority.

Ratio Decidendi: Section 159 of the Income-tax Act, 1961 applies only to income for which the deceased would have been liable had he survived, and does not extend to income that first accrues or arises after death; such income must be assessed in the hands of the estate or the proper successor under the relevant provision.

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