1985 (3) TMI 95 - AT - Income Tax

Tribunal recognizes legal heirs' rights in property income dispute, directs individual assessments.

The Tribunal ruled in favor of Mrs. Veera and Mrs. Asha, holding that section 168 of the Income-tax Act, 1961 was inapplicable. It determined that both ... Assessment Year Issues:Assessment of income from the estate of deceased Dhairyawan in the hands of Mrs. Veera and Mrs. Asha, Applicability of section 168 of the Income-tax Act, 1961, Validity of the appointment of Mrs. Veera as an administrator, Protective assessment made by the ITO for Mrs. Asha, Interpretation of legal heirs' rights in case of intestate death.Analysis:The judgment involves eight appeals for the assessment years 1977-78 to 1980-81, four each related to Mrs. Veera D. Thackersey and her daughter, Mrs. Asha Ostowari. Mrs. Veera obtained divorce and remarried, inheriting property from her deceased husband, Dhairyawan. Disputes arose regarding the property, leading to legal proceedings. Mrs. Veera and Mrs. Asha filed separate income tax returns, each declaring half share in the property income. The Income Tax Officer (ITO) assessed the entire income in Mrs. Veera's individual assessment, citing section 168 of the Income-tax Act, 1961, without making it a protective assessment. Mrs. Asha's income was assessed protectively due to the inclusion of her share in Mrs. Veera's assessment.The Appellate Assistant Commissioner (AAC) held that the property vested in Mrs. Veera and Mrs. Asha as legal heirs, making section 168 inapplicable. He emphasized that Mrs. Veera's appointment as administrator was interim and did not change the legal heirs' rights. The AAC directed the ITO to assess each heir for their respective half share of income from the property. The department appealed, arguing against the AAC's decision on the applicability of section 168 and the nature of Mrs. Asha's assessment.The Tribunal analyzed the department's contention that Mrs. Veera should be assessed as an administrator under section 168. It noted that Mrs. Veera and Mrs. Asha had acted as legal heirs, not administrators, based on various documents and precedents. The Tribunal distinguished a prior case and cited a subsequent Bombay High Court decision emphasizing the requirement of a will for section 168 to apply. It further referred to a Calcutta High Court decision regarding intestate succession and the appointment of an administrator pendente lite.The Tribunal concluded that the ITO's assessment was erroneous as half the income should be assessed in Mrs. Veera's hands and the other half in Mrs. Asha's, rejecting the protective assessment. It upheld the AAC's decision, dismissing all departmental appeals. The judgment clarified the legal position regarding intestate succession, legal heirs' rights, and the interpretation of section 168 in such cases.