{"id":6265,"date":"1991-10-29T00:00:00","date_gmt":"1991-10-28T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/navnit-lal-sakar-lal-vs-commissioner-of-income-tax-on-29-october-1991"},"modified":"2019-03-24T22:29:28","modified_gmt":"2019-03-24T16:59:28","slug":"navnit-lal-sakar-lal-vs-commissioner-of-income-tax-on-29-october-1991","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/navnit-lal-sakar-lal-vs-commissioner-of-income-tax-on-29-october-1991","title":{"rendered":"Navnit Lal Sakar Lal vs Commissioner Of Income Tax on 29 October, 1991"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Navnit Lal Sakar Lal vs Commissioner Of Income Tax on 29 October, 1991<\/div>\n
Equivalent citations: 1992 AIR 466, \t\t 1991 SCR Supl. (1) 585<\/div>\n
Author: S Rangnathan<\/div>\n
Bench: Rangnathan, S.<\/div>\n
           PETITIONER:\nNAVNIT LAL SAKAR LAL\n\n\tVs.\n\nRESPONDENT:\nCOMMISSIONER OF INCOME TAX\n\nDATE OF JUDGMENT29\/10\/1991\n\nBENCH:\nRANGNATHAN, S.\nBENCH:\nRANGNATHAN, S.\nRAMASWAMI, V. (J) II\nOJHA, N.D. (J)\n\nCITATION:\n 1992 AIR  466\t\t  1991 SCR  Supl. (1) 585\n 1992 SCC  (1) 185\t  JT 1991 (4)\t186\n 1991 SCALE  (2)893\n\n\nACT:\nIncome Tax Act, 1961:\n       Section\t 168\tIncome\tfrom  estate   of   deceased\nperson--Properties bequeathed to two grandsons--No  executor\nnamed  in  the will--Son of testator administering  the\t es-\ntates--Part of estate duty liability outstanding--Vesting of\nproperties in the legatees---When takes\t place---Administra-\ntion  of estate---Whether complete  Half of the income\tfrom\nestate\tassessed  at the hands of assessee one\tof  the\t two\nlegatees--Assessments whether validity made.\n\n\n\nHEADNOTE:\n   The grandfather of the appellant assessee executed a will\nin  1956 bequeathing his properties to the assessee and\t his\nbrother. The testator died in 1957 and since no executor was\nnamed  in  the will, his son 'S'describing  himself  as\t the\nlegal  representative of the deceased, furnished Income\t Tax\nand  Wealth-Tax\t returns  in respect of the  estate  of\t the\ndeceased  and he was assessed on the basis of the  said\t re-\nturns up to assessment year 1967-68.\n    In respect of the assessee, the Income Tax Officer\ttook\nthe  view that the estate of the deceased vested in the\t two\ngrandsons viz., the assessee and his brother immediately  on\nthe death of the testator, as per the terms of the will. The\nIncome Tax Officer included half of the income from  proper-\nties left behind by the deceased in the total income of\t the\nassessee in respect of assessment years 1963-64 to  1967-68,\nrejecting  the assessee's contention that the estate was  in\nthe  administration of the Executor and the  income  thereof\nhad  rightly been assessed in the hands of the executor.  On\nappeal,\t the Appellate Assistant Commissioner confirmed\t the\nview  taken by the Income Tax Officer. However,\t the  Income\nTax  Appellate Tribunal took the view that the assessee\t was\nnot  taxable  in respect of any part of the  estate  of\t the\ndeceased,  and deleted the additions made in the  assessment\norders.\n\t instance of the Revenue, reference was made to\t the\nHigh the question of assessability of the half share of\t the\nestate of the\n586\ndeceased  at the hands of the assessee, and the\t High  Court\nanswered  the  question\t in  favour  of\t Revenue.  Aggrieved\nagainst ,the High Court's orders the assessee preferred\t the\npresent appeals.\n    On behalf of the assessee, it was contended that where a\nperson dies, the income of the estate of the deceased person\nis chargeable to tax in the hands of the executor, and since\n'S'  the  son of the deceased was an 'executor'\t within\t the\nmeaning\t of Section 168 of the Income Tax Act, 1961  in\t re-\nspect  of  the estate of the deceased, the income  from\t the\nproperties left behind by the deceased was to be assessed in\nthe  hands of the Executor only and not in the hands of\t the\nappellant  assessee,  and that the discharge of\t the  estate\nduty  liability of the estate of the deceased being  one  of\nthe  primary functions of an executor the administration  of\nthe  estate cannot be said to be complete until\t the  estate\nduty liability was properly provided for.\n    On behalf of the Revenue, it was contended that the will\ncontained  a  direct  and simple bequest in  favour  of\t the\nassessee  and  his brother;, that there was nothing  in\t the\nestate\tto be administered and the properties vested in\t the\ntwo  legatees  immediately. It was also contended  that\t the\ndelay  on  the\tpart of the executor in\t making\t payment  of\nestate\tduty  and handling over the properties\tto  the\t two\nlegatees  cannot postpone the vesting of the estate  in\t the\ntwo beneficiaries.\n\n\n\nJUDGMENT:\n<\/pre>\n
Allowing the appeals, this Court,
\n    HELD  :1.1\tSection 168(3) of the Income Tax  Act,\t1961
\nmakes  it  clear that the executor will continue to  be\t as-
\nsessed\tuntil the estate is distributed among the  benefici-
\naries  equally\taccording to their several  interests.\tThis
\nprovision  does not enact anything different from  the\tpre-
\nexisting law on the subject. [596 B]
\n    1.2\t  In  view  of the facts and  circumstances  of\t the
\npresent\t ease,\tthe High Court was wrong in  coming  to\t the
\nconclusion  that the administration must be deemed  to\thave
\ncome to an end.\n<\/p>\n
      Raghavalu Naidu & Sons v.C.L T., [1950] 18 I.T. R. 787
\n(Mad.), referred to. [595 E]
\n    2.1. Having regard to the nature of the properties\tleft
\nby  the deceased it is clear that the executor\thad  certain
\nsteps to take before he could wash his hands off the  admin-
\nistration  of  the estate. The movable\tproperties  and\t the
\nimmovable properties belonging to the deceased in his  indi-
\nvidual capacity had to be divided into two equal shares\t and
\nhanded\tover  to  the two beneficiaries. A  perusal  of\t the
\nassessment order also
\n587<\/span>
\nindicates that the deceased had a half share in a firm.\t The
\nexecutor,  continued to derive a half share from  the  firm.
\nThere  is no information on record as to how this  share  in
\nthe  firm held by the deceased was disposed of. It was\tpart
\nof the duties of the executor to make arrangements regarding
\nthe  devolution of the share of the deceased in the firm  by
\nhaving the two legatees taken in as partners in respect of a
\none-fourth  share  each in the firm. in the absence  of\t any
\nsuch  steps, the asset in question cannot be deemed to\thave
\nvested in the beneficiaries. [595 E-H]
\n    2.2.  There is nothing on record to indicate that  there
\nwas  any deliberate attempt on the part of the\texecutor  to
\npostpone  the  distribution  of the estate.  There  is\talso
\nnothing to indicate that the assessment proceedings were  in
\nany way delayed by the executor or the other legal represen-
\ntatives.   A  substantial part of the estate duty  had\tbeen
\npaid without delay and there is nothing to suggest that\t the
\npayment of the balance of the estate duty was delayed delib-
\nerately by the executor. [593 C-E]
\nNavnitlal  Sakarlal  v.C.W.T., (1977) 106  I.T.R.  512,\t ap-
\nproved.\n<\/p>\n
Navnitlal Sakarlal v. 677; (1978) 125 I.T.R. 67, overruled.\n<\/p>\n
    3.\tUnder the Estate Duty Act, the accountable person is
\njointly and severally liable for the whole of the duty along
\nwith  other accountable persons. This does  not\t necessarily
\nmean that the incidence of the duty will ultimately fall  on
\nhim always. But he has to consider ways and means of  paying
\nthe  duty and, though he may or may not be able to  pay\t off
\nthe  entire estate duty before distributing the\t estate,  he
\nwill be exposing himself to a great risk if he does not make
\nadequate  arrangements\tfor  the due payment  of  the  duty,
\nbefore\tdistributing it. The High Court was wrong in  taking
\nthe view that the fact of a part of the estate duty liabili-
\nty being outstanding should be ignored in deciding the issue
\nas to whether administration is complete. [594 D-G]
\nLeelavatamma v.C.E.D, (1991) 188 I.T.R. 803 (SC), relied on.\n<\/p>\n
      C.I.T.  v. Bakshi Samparan Singh [1982] 133   ITR\t 650
\n(P&H); C.I.T. v. Ghosh, (1986) 159 ITR 124 (Cal.); Raghavalu
\nNaidu  & Sons v. C.I.T. (1950) 18 ITR 787  (Mad.);  referred
\nto.\n<\/p>\n
XXX\t\t  XXX\t\t\t XXX
\n588<\/span>
\n    RANGANATHAN,  J.  Balabhai Damodardas,  aged  98  years,
\nexecuted will on October 6, 1956, so that, after his  death,
\nhis property might be administered as per this” desire”. The
\nmaterial provisions of the will were follows:\n<\/p>\n
\t      “2.  I  have the following  properties  of  my
\n\t      ownership:-\n<\/p><\/blockquote>\n
\t      (a)  My individual i.e. ‘personal movable\t and
\n\t      immovable property which is being assessed  in
\n\t      Income Tax as individual.\n<\/p><\/blockquote>\n
\t      (b) Whatever right, title and interest I\thave
\n\t      in  movable  and immovable properties  of\t our
\n\t      joint family.\n<\/p><\/blockquote>\n
\t      There was no executor named in the will.\n<\/p><\/blockquote>\n
\t      3. The above movable and immovable  properties
\n\t      I\t may enjoy, sell or exchange in future,\t but
\n\t      if  by  God’s will at the time when I  am\t not
\n\t      alive  whatever is left of my individual\tper-
\n\t      sonal  property  of  my  ownership   including
\n\t      additions or deletions therefrom after  paying
\n\t      my debts, income-tax, super-tax, estate  duty,
\n\t      municipal tax etc. and any other\toutstandings
\n\t      as  also\tmedical expenses  and  expenses\t for
\n\t      obsequial\t ceremonies and charity and also  my
\n\t      right, title and interest in our joint  family
\n\t      movable and immovable properties, in that\t way
\n\t      all  my property when I am not alive shall  be
\n\t      taken  possession of by my two grandsons\tNav-
\n\t      nitlal Sakarlal and Nandkishore alias  Shamub-
\n\t      hai Sakarlal and they shall use and enjoy\t the
\n\t      same as they desire.”\n<\/p><\/blockquote>\n
\t      There was no executor named in the will.<\/p><\/blockquote>\n
    Balabhai  Damodardas died on 31-12-57.  Thereafter,\t his
\nson,  SakarBalabhai, describing himself as the legal  repre-
\nsentative  of the deceased, furnished returns of  income  as
\nwell  as returns of wealth in respect of the’ estate of\t the
\ndeceased Balabhai Damodardas and he was assessed on the
\nbasis  of those returns for the assessment  years  following
\nthe death and up to assessment year 1967-68.
\n    We\tare concerned in these appeals with the\t income\t tax
\nassessments of Navnitlal Sakarlal (herein referred to as the
\n‘assessee’),  one of the two grandsons of Balabhai  Damodar-
\ndas,  to whom the latter had bequeathed his properties,\t for
\nthe  assessment\t years 1963-64 to 1967-68.  The\t Income\t Tax
\nOfficer took the view that the estate of Balabhai Damodardas
\nhad
\n589<\/span>
\nvested in the two grandsons immediately on his death as\t per
\nthe  terms of  the will. He, therefore, proceeded to  assess
\nthe  assessee and his brother separately in respect  of\t one
\nhalf of the income from the properties let behind by  Balab-
\nhai  Damodardas.  The contention of the assessee,  that\t the
\nestate\tof the deceased was still under\t Administration\t and
\ncontinued to be so till August 5, 1970; and that the  income
\nthereof had rightly been as sessed, in the earlier years  as
\nwell  as  in the year as well in the years  presently  under
\nconsideration,\tin the hands of Sakarlal Balabhai as  execu-
\ntor, was rejected. The Appellate Assistant Commissioner also
\nconfirmed the view taken by the Income-Tax Officer,  though,
\nfor  the assessment years 1966-67 and 1967-68 he  made\tsome
\nmodifications in the assessments with which we are not\there
\nconcerned.\n<\/p>\n
    The Income Tax Appellate Tribunal had earlier taken\t the
\nview, in the wealth-tax assessments of the assessee and\t his
\nbrother for the assessment years 1963-64 and 1964-65,  that,
\non  the death of Balabhai Damodardas, the assessee  and\t his
\nbrother had become the owners of interests in the estate  in
\naccordance with the will and were consequently assessable to
\nwealth-tax  in\trespect of their respective  shares  in\t the
\nestate.\t This view had also been upheld by the Gujarat\tHigh
\nCourt  in  its\tjudgment  reported  at\tNavnitlal   Sakarlal
\nv.C.W.T. [1977] 105 I.T.R.512. However, when the  income-tax
\nappeals for the assessment years 1964-65 to 1967-68 came  up
\nbefore the Tribunal, it took the view that the assessee\t was
\nnot  taxable  in respect of any part of the  income  of\t the
\nestate\tof Balabhai Damodardas for these  assessment  years.
\nThe additions made in the assessment orders in this  respect
\nwere deleted.\n<\/p>\n
    At\tthe instance of the Revenue, the following  question
\nwas  referred to the High Court of Gujarat for\tits  opinion
\nunder section 256(1) of the Income Tax Act.1961:\n<\/p>\n
\t      “Whether the Income Tax Appellate Tribunal was
\n\t      right in law in holding that half share of the
\n\t      income  in respect of the estate of late\tShri
\n\t      Balabhai\tDamodardas  was not taxable  in\t the
\n\t      hand of the assessee when the estate was being
\n\t      administered by Shri Sakarlal Balabhai, having
\n\t      regard to the provisions of Section 168 of the
\n\t      Income Tax Act, 1961?”<\/p><\/blockquote>\n
    This question has been answered by the High Court –\t its
\ndecision  had been reported as Navnitlal Sakarlal v  CIT  in
\n[1978]\t125 I.T.R.67 – in the negative and in favour of\t the
\nRevenue.  The  present\tappeals have bee  preferred  by\t the
\nassessee from the High Court’s judgment.\n<\/p>\n
590<\/span><\/p>\n
    At the outset, two aspects which had been raised  before
\nthe  High Court, may be cleared up. In the first place,\t the
\ncontention  of the assessee before the High Court  was\tthat
\nthe  decision  in the wealth-tax case would not\t govern\t the
\nincome\ttax assessments in view of the provisions  contained
\nin  Section  168 of the Income Tax Act,\t 1961,\ta  provision
\ncorresponding  to which (viz. s.19A) has been introduced  in
\nthe  Wealth Tax Act only on 1.4.65. The High  Court  pointed
\nout – and it is common ground before us that “in view of the
\ndistinction between the provisions of the Wealth Tax Act and
\nthe  Income  Tax Act and in view of the fact that,  for\t the
\nrelevant years under consideration before the Division Bench
\nwhich  considered  the wealth-tax case,\t namely,  assessment
\nyears  1963-64\tand  1964-65, section 19-A was\tnot  on\t the
\nstatute\t book, the decision in the wealth-tax case will\t not
\naffect\tthe  decision  in this case except  in\tan  indirect
\nmanner”.  The  second issue, on which a\t certain  amount  of
\ndebate\ttook place before the High Court, was as to  whether
\nSakarlal  Balabhai could be treated as an ‘executor’  within
\nthe  meaning  of  section 159 of the  Income  Tax  Act,1961,
\nconsidering  that  the will had not named any  executor\t and
\nthat  Sakarlal Balabhai had taken charge of the\t estate\t and
\nbegan administering it voluntarily. On this point, the\tHigh
\nCourt  has held, after discussing the  relevant\t provisions,
\nthat  Sakarlal Balabhai was a person who  intermeddled\twith
\nthe  estate of the deceased and was, therefore, included  in
\nthe definition of ‘legal representative’ for the purposes of
\nthe  Income Tax Act. On this point also there is no  dispute
\nbefore us.\n<\/p>\n
    The\t only  questions arising for  our  consideration  is
\nabout  the proper mode of assessment of the income from\t the
\nproperties left by Balabhai Damodardas. The procedure to  be
\nfollowed., when an assessee dies, is set out in section\t 168
\nof the Act. This section reads as follows:\n<\/p>\n
\t      168. (1) Subject as hereinafter provided,\t the
\n\t      income of the estate of deceased person  shall
\n\t      be  chargeable  to  tax in the  hands  of\t the
\n\t      executor,\n<\/p><\/blockquote>\n
\t      (a) If there is only one executor, then, as if
\n\t      the executor were an individual; or\n<\/p><\/blockquote>\n
\t      (b)  If  there are more  executors  than\tone,
\n\t      then, as if the executors were an\t association
\n\t      of persons;\n<\/p><\/blockquote>\n
\t      and for the purposes of this Act, the executor
\n\t      shall be deemed to be resident or non-resident
\n\t      according\t as the deceased person was a  resi-
\n\t      dent or non-resident during the previous\tyear
\n\t      in which his death took place.\n<\/p><\/blockquote>\n
\t      591<\/span><\/p>\n
\t      (2)  The assessment of an executor under\tthis
\n\t      section  shall  be made  separately  from\t any
\n\t      assessment that may be made on him in  respect
\n\t      of his own income.\n<\/p><\/blockquote>\n
\t      (3)  Separate assessments shah be\t made  under
\n\t      this  section  on\t the total  income  of\teach
\n\t      completed previous year or part thereof as  is
\n\t      included\tin the period from the date  of\t the
\n\t      death to the date of complete distribution  to
\n\t      the  beneficiaries of the estate according  to
\n\t      their several interests.\n<\/p><\/blockquote>\n
\t      (4)  In  computing  the total  income  of\t any
\n\t      previous\tyear under this section, any  income
\n\t      of the estate of that previous year distribut-
\n\t      ed  to,  or  applied to the  benefit  of,\t any
\n\t      specific\tlegatee\t of the estate\tduring\tthat
\n\t      previous year shah be excluded; but the income
\n\t      so  excluded  shall be included in  the  total
\n\t      income  of the previous year of such  specific
\n\t      legatee.\n<\/p><\/blockquote>\n
\t      Explanation:   In\t this  section,\t  “executor”
\n\t      includes\tan  administrator  or  other  person
\n\t      administering the estate of a deceased person.<\/p><\/blockquote>\n
    On behalf of the appellant, Sri Salve submits that, when
\na  person  dies, the income of the estate  of  the  deceased
\nperson\tis chargeable to tax in the hands of  the  executor,
\nseparate assessments being made on the total income of\teach
\ncompleted  previous  year or part thereof comprised  in\t the
\nperiod\tfrom the ‘date of the death to the date of  complete
\ndistribution to the beneficiaries of the estate according to
\ntheir  several\tinterests’.  He points out that\t it  is\t now
\ncommon\tground\tthat  Sakarlal Balabhai\t was  an  ‘executor’
\nw,thin\tthe meaning of section 168 in respect of the  estate
\nof  the deceased. The Tribunal has also given a\t categorical
\nfinding of fact in the following terms:\n<\/p>\n
\t      “Balabhai\t Damodardas  died  on  December\t 31,
\n\t      1957, leaving behind as his next-of-kin a son,
\n\t      named Sakarlal Balabhai, three daughters and a
\n\t      number of grand-children including the  appel-
\n\t      lant assessee and his brother. On the death of
\n\t      Balabhai\tDamodardas, Shri  Sakarlal  Balabhai
\n\t      took  charge of the properties left behind  by
\n\t      the  deceased and started administering  them.
\n\t      By  an  order made on December  30,  1961,  an
\n\t      amount  of Rs.1,04,619 was determined  as\t the
\n\t      estate duty payable on the properties  passing
\n\t      on the death of Balabhai Damodardas. It is not
\n\t      in dispute that upto the close of the  assess-
\n\t      ment year 64\/65, part of the estate duly
\n\t      592<\/span>
\n\t      was remaining unpaid and further upto the last
\n\t      day of the accounting year for the  assessment
\n\t      year  67\/68 which is the last assessment\tyear
\n\t      in  appeal, the estate was not distributed  or
\n\t      applied  for the benefit of the  assessee\t and
\n\t      his brother, the two legatees. As a matter  of
\n\t      fact nothing was distributed till 5th  August,
\n\t      1970″.<\/p><\/blockquote>\n
      He submits that, on the above finding of fact and\t the
\ndear terms of sec.168(3) & (4), the income of the properties
\nleft by Balabhai Damodardas ‘had to be assessed in the hands
\nof Sakarlal Balabhai, commencing from the date of death\t and
\nat least till the 5th of August, 1970.\n<\/p>\n
      We are of the opinion that the above contention  urged
\non behalf of   the assessee is well founded. There is now no
\ndispute\t that Sakarlal Balabhai was the executor in  respect
\nof the estate left by Balabhai Damodardas. There is also  no
\ndispute that the income from the properties left by Balabhai
\nDamodardas  was assessed in the hands of  Sakarlal  Balabhai
\nfor  the assessment years 1958-59 to 1962-63.\tNothing\t has
\nhappened  since to change the above position.  The  Tribunal
\nhas  found  that  Sakarlal Baiabhai  was  administering\t the
\nestate as an executor and that the estate was not distribut-
\ned  till  the 5th of August, 1970. It has also\tpointed\t out
\nthat  the estate duty payable in respect of  the  properties
\npassing\t on  the death of Balabhai Damodardas had  not\tbeen
\npaid  till  the close of the previous year relevant  to\t the
\nassessment year 1964-65. Though the Tribunal has not set out
\nin  detail  the manner in which the  estate  was  ultimately
\ndistributed,  it has given a categorical finding that, as  a
\nmatter\tof  fact  nothing was distributed till\tthe  5th  of
\nAugust, 1970, implying that there was a distribution on that
\ndate. The Revenue has not challenged the correctness of this
\nfinding\t of fact either generally or by raising\t a  specific
\nquestion of law as to whether this finding was based on\t any
\nmaterial. In the face of these findings by the Tribunal,  it
\nis  not\t possible  to hold that the  administration  of\t the
\nestate was complete in any of the previous years with  which
\nwe are concerned.\n<\/p>\n
On behalf of the Revenue, Sri Manchanda vehemently  contends
\nthat  the  will\t contained a direct and\t simple\t bequest  in
\nfavour\tof the assessee and    his brother. He submits\tthat
\nthere was nothing in the estate to be administered and\tthat
\nthe  properties directly vested in the two legatees  immedi-
\nately in equal shares. According to his submission, the mere
\nfact that Sakarlal Balabhai purported to take charge of\t the
\nestate\tand administer it and was prolonging  the  so-called
\nadministration by delaying the payment\t  of estate duty and
\nthe handing over the properties to the only two legatees,
\n593<\/span>
\ncannot postpone the vesting of the estate in the two benefi-
\nciaries.  It  is  submitted that there\twas  no\t complicated
\nprocess of administration called for in the present case. He
\nsubmits that the intervention of Sakarlal Balabhai was\tpart
\nof  a device to postpone a direct and immediate\t vesting  of
\nthe  income and the properties in the hands of the  legatees
\nin  view of the high rates of tax applicable to their  indi-
\nvidual\tassessments  and to cordon off the  income  and\t the
\nestate into a separate assessment, purportedly on a socalled
\nexecutor.  He  submits that the Court should  not  encourage
\nattempts  of this type to avoid the legitimate incidence  of
\ntaxation and that, in the circumstances, the answer given by
\nthe High Court to the reference should be upheld.\n<\/p>\n
     There  are\t a number of difficulties in  accepting\t the
\ncontention put forward by Sri Manchanda. In the first place,
\nthe  contention, its present form, has not been put  forward
\nat any of the earlier stages. There is nothing in the state-
\nment  of facts or in the orders of the authorities to  indi-
\ncate  that there was any deliberate attempt on the  part  of
\nthe executor to postpone the distribution of the estate.  As
\nwe  have  mentioned  earlier, Balabhai\tDamodardas  died  on
\n31.12.57  and  the assessment to estate duty of\t the  estate
\npassing\t on  his death was completed on December  30,  1961.
\nThere is nothing to indicate that the assessment proceedings
\nwere  in any way delayed by the executor or the other  legal
\nrepresentatives.  A substantial part of the estate duty\t had
\nbeen  paid by October or November 1963. There is nothing  to
\nsuggest\t that the payment of the balance of the estate\tduty
\nwas delayed deliberately by the executor.\n<\/p>\n
      Again,  the submission that there was nothing  in\t the
\nestate to be administered and this process was being  delib-
\nerately\t prolonged by the executors and the legatees is\t not
\nbased on the record. Though a reference has been made to the
\nestate duty liabilities being outstanding, there is  nothing
\nto show that the only thing that remained to be done was the
\npayment of estate duty and that nothing else remained to  be
\ndone. There is no information on record before us as to\t the
\nvarious\t assets and liabilities of the estate shown  by\t the
\nexecutor. No attempt has been made to find out whether there
\nwere  any other outstanding liabilities and when these\twere
\ndischarged. We have mentioned earlier that the Tribunal\t has
\nfound  that something was done towards the  distribution  of
\nthe  estate  in\t 1970 and it is not the\t suggestion  of\t the
\nDepartment that this finding is based on no material. It is,
\ntherefore, not possible to allow the counsel for the Revenue
\nto raise this contention at this stage.\n<\/p>\n
    Proceeding\ton  the premise that only  the\testate\tduty
\nliability was outstanding, a contention appears to have been
\nput forward for the
\n594<\/span>
\nRevenue\t that the discharge of the estate duty liability  is
\nthe  personal liability of the residuary legatees and is  no
\npart  of the duties of the executor. This argument has\tbeen
\naccepted by the High Court. On behalf of the assessee, it is
\nsubmitted that the discharge of the estate duty liability in
\nrespect of the estate of the deceased is one of the  primary
\nfunctions of an executor and that the administration of\t the
\nestate can not be said to be complete until the estate\tduty
\nliability  is  properly provided for, vide:  C.I.T.v.  Ghosh
\n(1986] 159 I.T.R. 124 (Cal). We are of opinion’that there is
\nforece\tin the appellant’s contention. It seems that,  under
\nthe  English  Law, estate duty is regarded as  part  of\t the
\n“testamentary  expenses”  in  respect of  certain  kinds  of
\nproperty:  [See\t Williams on Executors\tand  Administrators,
\n14th  Edn.Vol.1,  pp.452-4]. The Estate Duty Act  makes\t the
\nexecutor one of the accountable persons. Under S.55, he\t has
\nto deliver an account of the estate passing on the death. He
\nis accountable, under S.53, for the whole of the estate duty
\non  the property passing on the death though he will not  be
\nliable for duty in excess of assets of the deceased which he
\nactually  received  or\twhich, but for his  own\t neglect  or
\ndefault, he might have received. He is jointly and severally
\nliable\tfor the whole of the duty along with other  account-
\nable person. It is true that this does not necessarily\tmean
\nthat the ultimate incidence of the duty will ultimately fall
\non  him\t always. But he has to consider ways  and  means  of
\npaying the duty and, though he may or may not be able to pay
\noff  the entire estate duty before distributing the  estate,
\nhe  will be exposing himself to a great risk if he does\t not
\nmake adequate arrangements for the due payment of the  duty,
\nbefore\tdistributing it. The proposition enunciated  in\t the
\ncases referred to by the High Court that the estate duty  is
\na  personal  liability\tof the heirs and is not\t a  debt  or
\nencumbrance  deductible in computing the principal value  of
\nthe  estate – a proposition now settled by the\tdecision  of
\nthis  Court in Leelavatamma v.C.E.D. [1991] 188\t I.T.R.\t 803
\n(S.C)  or the fact that the estate duty is a charge  on\t the
\nimmovable  properties passing on death do not  detract\tfrom
\nthe  duties  and  responsibilities of the  executor,  as  an
\naccountable  person, to make satisfactory  arrangements\t for
\nthe payment of the estate duty. It is, therefore,  difficult
\nto accept the view of the High Court that the fact of a part
\nof  the\t estate duty liability being outstanding  should  be
\nignored\t in deciding the issue as to whether  administration
\nis complete.\n<\/p>\n
     The  High\tCourt has also expresed the  view  that\t the
\nadministration of the estate should be deemed to be complete
\nas  the estate could and ought to have been handed  over  by
\nthe  executor to the legatees. It has accepted this  submis-
\nsion  because, in its view, the executor had postponed\t the
\nactual\tdistribution  between  the  two\t residuary  legatees
\nthough all debts
\n595<\/span>
\nhad  been discharged and the residue could have been  easily
\nascertained.  Applying\tthe test propounded  by\t Viswanantha
\nSastri,] in Raghavalu Naidu & Sons v.C.I.T. [1950] 18 I.T.R.
\n787 (Mad.) viz:\n<\/p>\n
\t      “[C]an  it be said that the  residuary  estate
\n\t      had taken concrete shape and could and  should
\n\t      have been handed over by the executors to\t the
\n\t      persons beneficially entitled but for the fact
\n\t      that the estate is Settled in trust and vested
\n\t      in the executors as trustees?”\n<\/p><\/blockquote>\n
\t      The High Court held:\n<\/p><\/blockquote>\n
\t      “Under  these circumstances, the only  conclu-
\n\t      sion  that could be drawn is that by the\tcom-
\n\t      mencement of the period that is under  consid-<\/p><\/blockquote>\n
\t      eration,\tthe residuary estate must be  deemed
\n\t      to  have\tbeen ascertained and  the  residuary
\n\t      estate  must  be said to have  taken  concrete
\n\t      shape  and  should have been  handed  over  by
\n\t      Sankarlal, the father of the assessee.  Administra
\ntion  had reached such a point that one can infer  that\t the
\nadministration\thad been completed and the residuary  estate
\nhad  been  ascertained or was capable or easily\t capable  of
\nbeing ascertained”.\n<\/p>\n
    We\tfind  it difficult to accept this  conclusion.\tEven
\nleaving\t the estate duty out of account, it is difficult  to
\nsee  how the High Court could have reached this\t conclusion.
\nHaving regard to the nature of the properties left by Balab-
\nhai  Damodardas, it is clear that the executor\thad  certain
\nsteps to take before he could wash his hands off the  admin-
\nistration  of  the estate. The movable\tproperties  and\t the
\nimmovable properties belonging to Damodardas in his individ-
\nual  capacity  had to be divided into two equal\t shares\t and
\nhanded\tover  to  the two beneficiaries. A  perusal  of\t the
\nassessment order also indicates that Balabhai Damodardas had
\na half share in a firm known as Mangaldas Balabhai & Co.  It
\nappears\t that Sankarlal Balabhai, as executor, continued  to
\nderive\ta half share from the firm. There is no\t information
\non record as to how this share in the firm held by  Balabhai
\nDamodardas was disposed of. It was part of the duties of the
\nexecutor  to make arrangements regarding the  devolution  of
\nthe share of Balabhai Damodardas in the firm say, for  exam-
\nple,  by  having the two legatees taken in  as\tpartners  in
\nrespect\t of  a\tone-fourth share each in the  firm.  In\t the
\nabsence\t of any such steps, the asset in question cannot  be
\ndeemed to have vested in the beneficiaries. In fact, even in
\nwhat  may be described as much clearer situations and  where
\nthe executor was also the sole beneficiary, it has been held
\nthat  the  administration is not complete  vide,  C.I.T.  v.
\nBakshi
\n596<\/span>
\nSampuran  Singh, [1982] 133 I.T.R. 650 (P&H) and  C.I.T.  v.
\nGhosh [1986] 159 I.T.R. 124 (Cal).\n<\/p>\n
     Section  168 (3) makes it clear that the executor\twill
\ncontinue  to  be assessed until the  estate  is\t distributed
\namong  the beneficiaries equally according to their  several
\ninterests. This provision does not enact anything  different
\nfrom  the  pre-existing law on the subject  which  has\tbeen
\nclearly\t enunciated  by Viswanatha Sastri, J.  in  Raghavalu
\nNaidu, cited earlier, in these words:\n<\/p>\n
“Chapter VII of the Indian Succession Act, 1925,  succinctly
\ndefines the duties of executors. Shortly stated, it is their
\nduty  to  clear the estate – to pay the debts,\tfuneral\t and
\ntestamentary  expenses\tand the pecuniary legacies,  and  to
\nhand over the assets specifically bequeathed to the specific
\nlegatees.  When all this has been done, the balance left  in
\nthe executor’s hands is the residue and must be paid over to
\nthe  residuary legatees under Section 366 of the  Succession
\nAct or held in trust for them, if the directions in the will
\nrequire\t the residue to be so held. Section 211 (1)  of\t the
\nSuccession Act constitutes the executor of a deceased person
\nhis legal representative for all purposes and vests all\t the
\nproperty  of  the deceased in the executor. Though  no\ttime
\nlimit is fixed by the section for the duration in the office
\nof executor with its powers and rights, and in this sense an
\nexecutor  remains  an executor for an indefinite  time,\t the
\nproperty, which he has in the estate that devolves upon\t him
\nand over which his powers extend, does not remain his indef-
\ninitely.  By his assent to the disposition in the will\tthey
\n\t      become  operative, the executor is  pro  tanto
\n\t      divested of the property which was his  virtue
\n\t      officii, and the legatees have vested in\tthem
\n\t      as owners, the property in. the subject-matter
\n\t      of the bequests. Under Sections 332 and 333 of
\n\t      the Succession Act, the assent of the executor
\n\t      to a legacy may be express or implied from his
\n\t      conduct.\tBy  assent  is meant  not  that\t the
\n\t      executor\tconcurs in the dispositions  in\t the
\n\t      will  but that he assents to  the\t disposition
\n\t      taking  effect upon the specific\tproperty  if
\n\t      the bequest is specific, upon the sum of money
\n\t      if it is pecuniary or upon the residue brought
\n\t      out by the executor at the end of the adminis-
\n\t      tration,\tif it is a residuary bequest.  There
\n\t      is  the  same  necessity\tfor  the  executor’s
\n\t      assent  to  a bequest of the residue as  to  a
\n\t      bequest of a specific or pecuniary legacy.  So
\n\t      soon as he assents to the dispositions of\t the
\n\t      will — and the assent
\n597<\/span>
\nmay  be express or implied from his conduct —\tthey  become
\nfully operative and the title of the legatees becomes  abso-
\nlute. If there are trusts declared or created by the will in
\nrespect of the subject-matter of the bequest the trusts take
\neffect on such assent, the estate vested in the executor  as
\nsuch is divested and vests in the trustees of the will.\t The
\nfact that the executors are themselves the trustees does not
\nmake  any difference. Nor does the fact that the bequest  is
\nof  the residue affect the point, once the residue has\tbeen
\nascertained  in due course of administration. See  Attenbor-
\nough v. Solomon [1913] A.C. 76.\n<\/p>\n
\t       XXXX\tXXXX\t   XXXXX     XXXXX
\nThe  decision in Lord Sudeley v. Attorney-  General,  (1897)
\nA.C.  11  is  authority for the position that  even  if\t the
\ntrustees and executors happen to be the same persons,  until
\nthe claims of the testator’s estate for his debts and testa-
\nmentary\t expenses  and the pecuniary and  specific  legacies
\nhave  been satisfied, the residue does not come into  actual
\nexistence. It is a non- existin thing, until that event\t has
\noccurred.  The probability that there will be a\t residue  is
\nnot  enough,  but it must be actually  ascertained.  Dealing
\nwith  a\t trust of the residuary estate Lord  Halsbury,\tL.C.
\nobserved  :’Even if the trustees and executors happen to  be
\nthe  same  persons,until the estate  is\t fully\tadministered
\nuntil  the thing has been ascertained, until the trust\tfund
\nhas  been constituted, the thing of which the  trustees\t are
\ntrustees  has not been ascertained. Till then the  right  of
\nthe residuary legatee is to require the executors to  admin-
\nister the estate completely’.\n<\/p>\n
\t       XXX     XXXX\t XXXXX\t     XXXX
\nYounger, L.J. (afterwards Lord Blanesborough) in  Barnardo’s
\n\t      Homes  v.\t Special  Income  Tax  Commissioners
\n\t      [1921] 2 A.C. 1 stated the law in these terms:
\n“Until\tthe residue is ascertained, and until its  existence
\nas net residue has been acknowledged by the executor, either
\nby  payment to the residuary legatee, or if the\t residue  be
\nsettled, by the appropriation of a fund to meet the  settled
\nresidue, the residuary legatee has no iterest in any specif-
\nic  part  of that which subsequently becomes  residue  as  a
\nspecific  fund but his right is, until that moment  of\ttime
\narrives, to have the estate administered in
\n598<\/span>
\ndue course’. The House of Lords affirmed the decision of the
\nCourt of Appeal on the ground above stated.\n<\/p>\n
\t      XXXX\tXXXX\t   XXXX\t   XXXXX
\nThe  residuary\tlegatee might be interested  in\t the  estate
\nsubject to the payment of debts and legacies, but he did not
\nbecome the proprietor or owner of the residue except when  a
\nresidue had been ascertained which, on completion of  admin-
\nistration, is made over to him by the executiors.
\nThe question in each case is, has the administration reached
\na  point at which you can infer that the administration\t has
\nbeen  completed, the residuary estate has been\tascertained,
\nthe  bequest  of the residue has been assessed\tto  and\t the
\nresiduary  estate  therefore became vested in  trustees,  be
\nthey the executors themselves or strangers ?
\nIn other words, can it be said that the residuary estate had
\ntaken  concrete shape and could and should have been  handed
\nover  by the executors to the persons beneficially  entitled
\nbut  for  the fact that the estate is settled in  trust\t and
\nvested in the executors as trustees ?”\n<\/p>\n
\t       (Emphasis added)
\n    We have, therefore, to look at the factual position\t and
\nfind  out whether the executor has ascertained\tthe  residue
\nand acknowledged its existence. Even taking it that the last
\nsentence’  of the above quotation goes a little further\t and
\nenables the Court to “deem” the administration to have\tcome
\nto  an\tend  where the facts clearly  show  that  everything
\nnecessary  has been done in this regard, it is difficult  to
\naccept the conclusion of the High Court in the present\tcase
\nthat  the administration must be deemed to have come  to  an
\nend  in the face of the factual findings in the\t case  which
\nhave been referred to earlier.\n<\/p>\n
      For the reasons discussed above, we are of the opinion
\nthat  the  High\t Court, in the circumstances  of  the  case,
\nshould\tnot have interfered with the Tribunal’s finding\t and
\nthat the question referred should have been answered in\t the
\naffirmative  and in favour of the assessee.  We,  therefore,
\nallow  the  appeals  and answer the above  question  in\t the
\naffirmative. The assessee will be entitled to his costs.\n<\/p>\n
G.N.\t\t\t\t\t\t     Appeals\nallowed.\n599<\/span>\n\n\n\n<\/pre>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Navnit Lal Sakar Lal vs Commissioner Of Income Tax on 29 October, 1991 Equivalent citations: 1992 AIR 466, 1991 SCR Supl. (1) 585 Author: S Rangnathan Bench: Rangnathan, S. PETITIONER: NAVNIT LAL SAKAR LAL Vs. RESPONDENT: COMMISSIONER OF INCOME TAX DATE OF JUDGMENT29\/10\/1991 BENCH: RANGNATHAN, S. BENCH: RANGNATHAN, S. RAMASWAMI, V. […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-6265","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nNavnit Lal Sakar Lal vs Commissioner Of Income Tax on 29 October, 1991 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/navnit-lal-sakar-lal-vs-commissioner-of-income-tax-on-29-october-1991\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Navnit Lal Sakar Lal vs Commissioner Of Income Tax on 29 October, 1991 - 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