K. R. Patel (Dead) Through L. Rs vs Commissioner Of Income Tax

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1999 Supreme(SC) 934

1999(7) Supreme 443
Supreme Court of India
(From Bombay High Court)
D.P. Wadhwa & M.P. Shah, JJ.
K.R. Patel (Dead through LRs. -Appellant
versus
Commissioner of Income Tax -Respondent
Civil Appeal No. 5649 of 1990
Decided on 27-8-1999
Counsel for the Parties :
For the Appellant : Buddy A. Ranganadhan, Advocate.
For the Respondent : K.N. Shukla, Sr. Advocate, K.C. Kaushik, S.K. Dwivedi, Advocates.

Headnote:Income Tax Act, 1961-Section 168 read with Sections 160(1)(iv) and 161(1) - Executors - Assessment of-B died on 8.1.1962-Her will provided trusteets/executors were to convert all properties, other than bequeathed properties, into cash after obtaining probate-Till will was probated income was to be received by trustees/executors-Executors were directed first to pay all debts, funeral, death and other testamentary experses and Government dues-Residue was to be applied for charitable purposes-Probate wa granted on 5.4.1963-Immovable properties were transferred in February 1994 -Trust under Bombay public Trust Act came to be registered on 1.12.1964-Executors claiming to be assussed as trustees for assessment year 1963-64-Not tenable-Executors did not hold properties as trustees either from time of death of testator or from date on which probate of will was obtained -Functions of executors as imposed unpon them did not come to an end till February, 1964-No trust created under will till them-Not assessable as trustees but as executors.
       Held : Any rule of law as to when an executor sheds his character as an executor and when wears the robes of a trustee. It all depends on the construction of the will as to when the testator desired the trust to come into being. For that we have also to see as to when the functions of the executor administering the estate of the testator come to an end. Under Section 302 of the Succession Act, 1925 when probate in respect of any estate has been granted the High Court may, on application made to it, give to the executor any general or special directions in regard to the estate or in regard to the administration thereof. Section 317 of that Act imposes various duties on the executors. Then under Section 366 the surplus or residue of the deceased’s property, after payments of debts and legacies, shall be paid to the residuary legatee. (Para 22)
       In the present case when we examine clause 20 of the will read with other clauses, it is apparent that the trust was to come into being only after funeral and other expenses met, legatees paid and properties converted into cash by the executors and trustees that administration of the estate would come to an end and all the amount thus lying with the executors and trustees would form the corpus of the trust. Functions of the trustees and executors as imposed upon them did not come to an end till February 1964 and it, therefore, cannot be said that there was any trust created under the will till that time. Section 168(3) of the Act makes it clear that executor will continue to be assessed until the estate is distributed among the beneficiaries according to their servial interests. (Para 23)

Judgment

D.P. Wadhwa, J.-A Division Bench of the High Court of Judicature at Bombay on a reference under Section 256(1) of the Income-Tax Act, 1961 (for short the ‘Act’) decided all the three questions of Law referred to it for its opinion by the Income Tax Appellate Tribunal (‘Appellate Tribunal’ for short) in favour of the revenue. The assessee is aggrieved. The questions of law are:

“1. Whether, on the facts and in the circumstances of the case, K.R. Patel and B.G. Amin held the properties as trustees from the time of the death of Bhikhubai Chandulal, or whether they held the estate in that capacity from April 5, 1963, when probate of the will was obtained?

2. Whether, on the facts and in the circumstances of the case, K.R. Patel and B.G. Amin received income of certain part of the estate as executors and income of the remaining part of the estate as trustees?

3. Whether, on the facts and in the circumstances of the case, K.R. Patel and B.G. Amin were liable to be assessed as trustees as trustees under Section 161 of the Income-Tas Act, 1961?”

These questions arose from the order of the Appellate Tribunal in the following circumstances.

2. One Mr. Bhikubai Chandulal Jalundhwala, a resident of Bombay, executed a will on January 5, 1962. She died three days after on January 8, 1962. During her life time she was possessed of considerable properties both movable and immovable. K.R. Patel, the appellant, and B.G. Amin, solicitor, since dead, were appointed as executors and trustees under the will. The executors and trustees under the will were directed first to pay all the debts, funeral, death and other testamentary expenses, estate duty, Government dues as soon as possible. Two immovable properties under the will were bequeathed to two different individuals. It was provided in the will that the executors and trustees should convey these immovalbe properties after obtaining probate of the will and until this was done to deal with the rents and income arising therefrom in the same manner as of other estate. The will also recited that the testator had during her life time gifted her one immovable property to K.R. Patel and under the will she provided for payment to him Rs. 40,000/- for him to construct a floor on the said property. Testator also devised payment to each of her employees amounting to their respective six months salary.

3. Then the executors and trustees were directed under the will to wind up the business of the testator which she was running in the name of Karamchand Ambalal & Co. or to sell the same as a going concern. Clauses 11, 15, 16 and 20 of the will are particularly relevant for purposes of this appeal and are as under :

“11. I direct that except as to the parts of my estate and properties which are bequeathed specifically by this my will or are otherwise disposed of by me prior to my death my executors and trustees shall convert all my moveable and immovable properties into cash.

15. I direct that my executors and trustees of this my will shall convey to the respective legatees of my aforesaid immovable properties after obtaining probate of this my will and until such properties are transferred to the names of the respective legatees the rents or income arising therefrom shall be collected by my executors and trustees and shall be dealt with by my trustees in the same manner as my other estate.

16. After my executors and trustees have sold my other remaining properties both movable and immovable (and have converted the same into cash) my executors and trustees shall stand possessed of the same and the same shall be dealt with by them as hereunder provided. I direct that my executors and trustees shall sell all the shares and securities of which I may be possessed of at the time of my death. I also direct that my executors and trustees shall realise all my investments whatsoever made and sh

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1999 Supreme(SC) 934

Cases Referred (3)