Executor assessment and postponed vesting bar double taxation of estate income in a minor legatee's hands

Income from trust property settled for a minor was not includible in the minor's hands during minority, as the issue was already covered by the Tribunal's earlier decision in the same assessee's case. Income from a deceased person's estate also could not be assessed again in the minor legatee's hands where administration remained incomplete, the will postponed vesting until majority, and the executor retained the estate. Section 168 required assessment of such estate income in the executor's hands while administration continued, and section 168(4) applied only to income first excluded from the executor's computation. The revenue's challenge therefore failed.

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Issues: (i) whether income arising from properties settled on a trust for the benefit of a minor assessee could be included in the minor's hands during minority; (ii) whether income from the estate of a deceased person, which had not yet been fully administered and was already assessed in the hands of the executor, could again be assessed in the hands of the minor legatee.

Issue (i): whether income arising from properties settled on a trust for the benefit of a minor assessee could be included in the minor's hands during minority.

Analysis: The issue was treated as governed by the Tribunal's earlier decision on the assessee's own case for an earlier assessment year, where similar income during minority had been held not includible in the assessee's hands. As the matter was directly covered by that decision, no separate basis was found to disturb the deletion made by the first appellate authority.

Conclusion: The addition was rightly deleted and the income was not taxable in the minor assessee's hands.

Issue (ii): whether income from the estate of a deceased person, which had not yet been fully administered and was already assessed in the hands of the executor, could again be assessed in the hands of the minor legatee.

Analysis: Under section 211 of the Indian Succession Act, the executor is the legal representative and the estate vests in him. The will specifically directed that the assets and liabilities would remain with the executor until the minor attained majority, with power to manage and hand them over thereafter. On that footing, executorial functions were not complete and the estate had not vested in the minor. Independently, section 168 of the Income-tax Act makes assessment of the deceased's estate in the hands of the executor mandatory so long as administration is incomplete, and section 168(4) permits assessment in the legatee's hands only of income that has been excluded from the executor's computation. Since the income had already been assessed in the executor's hands and no such exclusion was shown, a second assessment on the minor was unwarranted.

Conclusion: The income could not be assessed again in the minor legatee's hands and the deletion was correct.

Final Conclusion: The revenue's challenge failed on both issues, and the assessment made in the minor's hands was not sustainable.

Ratio Decidendi: Where a will postpones vesting until majority and the administration of the estate remains incomplete, the estate continues to vest in the executor; income of such estate must be assessed under section 168 in the executor's hands, and the legatee can be taxed only to the extent income is first excluded from the executor's assessment under section 168(4).

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