TaxTMI 
TaxTMI 
1981 (8) TMI 45
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....property situate in England. For the assessment years 1965-66, 1966-67 and 1967-68, the previous years being the financial years ended on March 31, 1965, March 31, 1966, and March 31, 1967, respectively, returns of income were filed by the executors of the property situate in India. The assessment order for the assessment year 1965-66 was passed on January 31, 1970, computing the total income at Rs. 3,81,842 and the net taxable income at Rs. 2,54,117 (including foreign income of Rs. 95,813) against " the Executors of the Estate of Late Maharaja Mahendrasinghji of Morvi " in the status of AOP. The assessment order for the assessment year 1966-67 was passed on December 29, 1970, computing the total income at Rs. 3,84,968 and the net taxable income at Rs. 2,37,517 (including " foreign income," of Rs. 1,04,467) against " H. H. Maharani Vijaykunverba of Morvi and M. P. Dadachanji, Surviving Executors of the estate of Late Maharaja Mahendrasinghji of Morvi" in the status of AOP. The assessment order for the assessment year 1967-68 was passed on September 15, 1971, computing the total income at Rs. 3,48,422 and the net total income at Rs. 2,07,700 (including " foreign income " estimated....
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....s of the property situate in England was not relevant for the purpose of bringing the entire income to tax under s. 168 in the hands of the AOP against whom the assessments were made. The appeals were accordingly dismissed, so far as the point under consideration is concerned. There were further appeals before the I.T. Appellate Tribunal against the aforesaid decisions. The submission before the Tribunal was that the relevant provisions of the income-tax law were required to be read along with the provisions of the Indian Succession Act, 1925, and that since under the latter Act, only such estate vested in legal ownership in the executors in respect of which they were appointed executors under the will, there were in the eye of law two separate estates-one situate in India and the other in England-and that in the hands of the executors of the estate in India, only such income could be brought to tax as arose or accrued to them out of such estate and that the income arising from the estate in England could not be clubbed with such income and brought to tax in their hands, because neither the estate nor the income arising from that estate vested in the executors of the property sit....
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.... in case the uncle or solicitor predeceased or was unable or unwilling to accept executorship. The will also appointed certain persons as guardians of the minor children of the testator during their respective minority. The testator declared that except such property as was earmarked for the Ruler of Morvi State, all his property, estate and effects were his self-acquired property and that he had full and absolute power to dispose of the same by his will, including certain immovable properties which stood in the joint names of himself and his wife. The testator directed monthly payments in certain sums by way of jivai being made to the three Maharanis and also provided, inter alia, that they would be entitled to continue to occupy the residential accommodation in Bombay or in Morvi or in Poona, which each of them occupied at the time of his death, with rent, if any paid for such residential accommodation out of the income of the estate. The testator then made provision for his unmarried daughters living at the date of his death and directed that certain Government securities held in the joint names of himself and his wife with all accumulations of interest shall be divided into as ....
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.... codicil thereto made in India relating to the disposition of the property situate elsewhere than in England, Scotland, Northern Ireland, Eire, the Isle of man and the Channel Islands. Under the will, the testator left to his wife free of duty " such sum as shall represent the aggregate of the sums that stand to my credit in my several banking accounts in the aforesaid countries ". The remainder of the estate was devised and bequeathed upon trust unto the trustees absolutely with the direction that they shall, at such time or times and in such manner as they shall think fit, sell, call in and convert into money such parts thereof as may not consist of money, subject, however, to full power to postpone such sale and conversion for such a period as the trustees, without being liable to account, might think proper. The trustees were directed to pay funeral and testamentary expenses and debts and legacies bequeathed under the will and then with the consent of his wife during her lifetime and afterwards at the discretion of the trustees, to invest the residue of monies in or upon any of the investments authorised under the will. The trustees were directed to stand possessed of the resid....
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....hts and responsibilities of living men may thus be determined by an instrument which was of no effect until the author of it was in his grave and had no longer any concern with the world or its affairs (See Salmond on Jusrisprudence, 12th Edn ., pp. 301, 302, 444). This power of the dead hand (mortus manus) is so familiar a feature in the law that we accept it as a matter of course, and have some difficulty in realising what a singular phenomenon it in reality is. We speak of the estate of a deceased person as if it were itself a person. We say that it owes debts, or has debts owing to it, or is insolvent. The law, however, recognises no legal personality in such a case. The rights and liabilities of a dead man devolve upon his heirs, executors and administrators, not upon any fictitious person known as his estate (See Salmond on Jurisprudence, 12th Edn., pp. 306, 444). We are herein concerned with executors and let us, therefore, consider the position of an executor and the mode of his appointment, his powers, functions and duties under the general law. The word " executor " as the term is at present accepted, signifies the person appointed, ordinarily by the testator by his....
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....th exception of probate has been made, the person entitled to probate of the remainder of the deceased's estate may take a grant of probate of the rest of the deceased's estate, recognise that an executor can be appointed for a limited or specified purpose or absolutely and that where a testator appoints two executors or two sets of executors, one for general purposes, and another for a limited purpose, probate shall be granted to both by the same instrument distinguishing the powers of each of them, when there is an application by both. However, if an application is only by a special executor, a probate will be granted to him only limited to the purpose relatable to his appointment, and if the application is made by the general executor, a probate will be granted to him as in the ordinary case, but with a reservation to the special executor for obtaining the limited probate. What happens to the representation of the estate of the deceased and how is it to be administered when there are two or more executors ? The law on this point is also well settled. If there are two or more executors, they are regarded as one person, and they have ordinarily a joint interest in the estate. Al....
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....ty; for, an executor has his estate as such in autre droit merely, viz., as the minister or dispenser of the property of the dead (See Williams on Executors and Administrators, 14th Edn., p. 264, and Executors and Administrators, 5th Edn. by Mustoe, p. 57). Section 211 of the Indian Succession Act, 1925, which provides, inter alia, that " all the property of the deceased person vests in him as such " (underlining supplied), makes it clear that it is only the legal estate that vests in the executor and that the vesting is not of the beneficial interest. The property only vests for the purpose of representation and administration. It is possible, however, that a will may appoint the same persons to be executors and trustees and even if this is not the case, an executor may become a trustee by his dealings with the assets, When an executor is functus officio as to any of the assets and still retains them in his possession, he becomes clothed with the character of a trustee of those assets. For instance, as soon as the executor has assented to a legacy, he becomes a trustee of the subject-matter of the legacy for the legatee; or when the residuary estate is vested in the executor upon ....
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....ative to the estate after the expiry of the year in the course of which such person died. (See CIT v. Amarchand N. Shroff [1963] 48 ITR 59 (SC) and CIT v. James Anderson [1964] 51 ITR 345 (SC)). In the present Act, s. 159 replaced s. 24B and it provides a machinery for the assessment of tax on the income of a deceased person on whom the tax had been originally charged. Thereunder, it is expressly recognised that upon the death of the assessee, the liability to pay any sum which the deceased would have been liable to pay, if he had not died, is that of his legal representative and for the purposes of the Act, the legal representative is treated as an assessee. If at the date of the death of the deceased assessee, a return in respect of the income earned by him in the previous year had already been filed and the assessment proceeding had commenced, it would not be necessary to start the proceeding afresh against the legal representative, since any proceeding taken against the deceased prior to the date of his death is, by a fiction, deemed as having been taken against the legal representative. From that stage onwards, however, the proceeding must be continued against the legal repre....
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....sessment of the income of the deceased only up to the date of his death and not up to the end of the accounting year in which the death occurred. The income of the estate for the period from the date of death up to the end of the accounting year in which the death occurred and for the subsequent accounting years is required to be assessed under s. 168. Section 168 alone, therefore, governs the assessment of the income of the estate of a deceased person and contemplates the levy of tax on such income in the hands of the executor in accordance with the provisions of the said section. Having set out the factual and legal position, we turn to the consideration of the questions raised before us on behalf of the assessee. The submission on behalf of the assessee was as follows: (1) In respect of two separate sets of property situate in two different countries, the deceased Maharaja executed two separate wills whereunder two distinct sets of executors were appointed. There were, therefore, two separate estates and only such estate vested in legal ownership in the distinct set of executors in respect of which they were appointed executors under the will. Consequently, in the hands of t....
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....utors take title to the separate parts of estate and that they may act independently in regard to the administration of the property separately vested in them. However, all such executors are the legal representatives of the deceased person and they are the ministers or dispensers of the estate of the deceased which vests in them in separate parts but which still nevertheless is the estate of the deceased. Indeed, the word " estate " means the totality or entirety of the property of a deceased, as is evident from the following statement of law explaining the true import of the said word in Black's Law Dictionary, 5th Edition, at page 491: " The total property of whatever kind that is owned by a decedent prior to the distribution of that property in accordance with the terms of a will, or, when there is no will, by the laws of inheritance in the State of domicile of the decedent. It means, ordinarily, the whole of the property owned by anyone, the realty as well as personalty. As used in connection with the administration of the decedent's estate, terms include property of a decedent, trust or other person as such property exists from time to time during the administration and hen....
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....y thus provided ensures the entire income of the whole estate being brought to tax in the hands of the executors under a single assessment. Even sub-ss. (3) and (4) of s. 168 require the estate being looked upon as a single whole and not as separate estates, whatever might be the arrangement made for the administration of such estate by the deceased assessee. In our opinion, therefore, the broad submission made on behalf of the assessee with regard to there being separate estates is not well founded in law. The estate of the deceased Maharaja situate within and outside the country is to be treated as one and indivisible for the purposes of the levy of tax under s. 168, irrespective of the fact that there are separate sets of executors appointed under two different wills in respect of the property situate within and without the country. The income from the whole of such estate can be brought to tax in the hands of the executors in the course of a single assessment made against such executors in the status of an association of persons. The clubbing of income which arose or accrued to the executors out of such estate, whether the estate be situate outside India or in India and wheth....
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....f the statement it was submitted on behalf of the assessee that the assessee had, in fact, objected to the inclusion of the income from the property situate abroad when the assessee was heard by the ITO. Apart from mentioning such submission, however, the Tribunal has not said anything further. Before the AAC an objection appears to have been taken on the ground that the executors of the property situate abroad having not been treated as members of the association of persons, the assessment of income received from such property could not have been made in the instant proceeding by clubbing it along with the income received from the property situate within the country. The AAC found that since the income from the property situate abroad was included in the assessments, the executors of such property should be " deemed to have become members of the association of persons " and that " it is not necessary that the returns should also have been signed by all the members of the association of persons ". When the matter went before the Tribunal, the emphasis was on the aspect of there being two distinct and separate estates and the requirement of the income from each estate being separate....
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....executors must be taken to have exercised the option of abandoning the plea that such income cannot be brought to tax in their hands and they, having not raised an objection at the appropriate time, must be taken to have waived the same (See CIT v. Sumantbhai C. Munshaw [1981] 128 ITR 142 (Guj)). We are, accordingly of the opinion that the second objection raised on behalf of the assessee is not well founded and that it cannot be entertained. Re: Ground No. 3: It is true that s. 168 deals with the assessment of the income of the estate of a deceased person in the hands of an executor. The period during which the section applies and remains operative is from the date of the death to the date of complete distribution to the beneficiaries of the estate according to their several interests. The income of the estate during that entire period computed in accordance with the provisions of the Act (after giving effect to sub-s. (4) of s. 168 in the process of such computation) is to be assessed in the hands of the executor by separate assessments made on the total income of each completed previous year or part thereof covered by the said period. If, therefore, the executor becomes functu....
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....e chargeability of the income from the property in the United Kingdom in the hands of the assessee against whom assessments were made as executors. In other words, the question of chargeability to tax of such income in the hands of the assessee in the character of executors was clearly under issue. Even the question referred for our opinion is widely worded and brings into controversy the issue as regards the chargeability of the income from the property in the United Kingdom to tax in the hands of the assessee in the character of executors. However, it cannot be gainsaid that the above-mentioned aspect of the question was not argued before the Tribunal. Indeed, as pointed out by the Tribunal in the forefront of its order, the wills in question were not even produced before it. The wills have come on the record of the reference only as accompaniments to the statement of case. Under the circumstances, the Tribunal has not at all applied its mind to the above-mentioned aspect of the question, namely, whether qua that part of the estate situate in the United Kingdom, which was the subject-matter of the will dated June 4, 1954, the concerned executors had become functus officio and hel....