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1981 Supreme(Guj) 108
Gujarat High Court
Judgename :B.J.DIVAN, P.D.DESAI
MAHARANI VIJAYKUNVERBA SAHEB OF MORVI - Appellant
Versus
COMMISSIONER OF INCOME TAX,gujarat - Respondent
I.T.R. 90 of 1975
Decided On : 08/14/1981
Headnote:
Indian Succession Act ,1925 – Section 159, 168 ,224 , 248 , 255 and 257 - Trustees Act , 1925 - Sections 31 and 32 - The property yielded considerable income - He died possessed of those properties - He had executed two distinct Wills one of property in India another of property situate in England - Will governing the property situate in India was executed on 31/10/195 - A codicil to the said Will was executed on 9/02/1956 The Will in respect of the property situate in England was executed on 4/06/1954 Under each Will the late Maharaja had appointed different executors- Assessment order for assessment year 1967-68 was passed on 15/09/1971 computing the total income at. Rs. 3 48 422 and the total income at Rs. 2 7 700 (including foreign income estimated at Rs. 1 5 0 or) against H. H. Maharani Vijaykunverba and H. P. Dadachanji Surviving Executors of the Estate of Late Maharaja Mahendrasinhji of Morvi in the status of A. O. P. - Not in dispute that the sums described as foreign income and included in the aforesaid three assessments represented the income derived by the executors from the property situate in England – Held, Tribunal indeed was as to the 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 - decision of the Supreme Court in C. I. T. v. Indian Molasses Co. Pvt. Ltd. 78 I. T. R. 474 - we therefore consider it appro- priate to decline to answer the question on the ground that the Tribunal has failed to consider and decide the question in all its legal and factual aspects. It will be open to the Tribunal to dispose of the appeals before it in light of the observations made by this Court after determining the said aspect which ought to have been decided - Wish to make it clear however that it would not be open to the assessee to raise before the Tribunal the questions which are already concluded by this decision - Reasons aforesaid we decline to answer the question referred to us by the Tribunal for our opinion - Each party shall bear its own costs of the reference - Order accordingly.
The legal document discusses the assessment of income tax on the estate of a deceased person who had executed two separate wills for properties located in different countries. The key legal principles are as follows:
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Single Estate Concept: Despite the existence of two wills and separate sets of executors, the estate of the deceased remains one indivisible entity. The law recognizes the estate as the totality of the deceased’s property, and the appointment of different executors for different parts does not create separate estates. Instead, all such executors are considered the legal representatives of a single, unified estate (!) (!) .
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Assessment of Income: The income of the deceased’s estate during the period from death to complete distribution is assessable in the hands of the executors as if they were an association of persons. The income from the entire estate, whether within or outside the country, can be clubbed and taxed collectively in a single assessment against the executors (!) .
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Executors’ Role and Powers: Executors hold the estate in a fiduciary capacity, and their powers include administering, managing, and distributing the estate’s assets. They may act independently or jointly, but their collective interest is in the estate as a whole. Their interest is in representing the estate, not in owning the property outright, and they may become trustees upon completion of administration (!) (!) (!) .
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Taxation of Income: The assessment machinery provides that income of the estate is taxable in the hands of the executors, whether there is one or multiple. When there are multiple executors, they are deemed to act as an association of persons for taxation purposes, and the income from the estate can be aggregated and taxed collectively (!) .
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Assessment Procedures: The law prescribes that assessments are to be made on the total income of the estate for each completed previous year. If the administration is complete, the executor’s role ceases, and the estate’s income is no longer assessable under this section. The assessment is primarily concerned with income accrued during the period of estate administration, not income received after the estate has been fully administered (!) (!) .
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Implication of Multiple Wills and Executors: The existence of separate wills and appointing different sets of executors for properties in different jurisdictions does not create separate estates for tax purposes. The entire property of the deceased is regarded as one estate, and the income from all parts of this estate can be assessed collectively. The law does not recognize the division of estate into separate taxable entities solely because of different wills or executors (!) (!) .
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Legal Personality of the Estate: The estate itself does not have a separate legal personality; instead, the estate’s rights and liabilities are represented through the executors. The estate’s income and assets are administered by the executors, who act as the legal representatives of the estate during the administration period (!) (!) .
In summary, the legal principles emphasize that the estate of a deceased person remains a single, indivisible entity for tax purposes, regardless of the number of wills or sets of executors appointed for different properties. All income from the estate, whether domestic or foreign, can be collectively assessed in the hands of the executors acting as a single entity.
( 1 ) MAHARAJA Mahendrasinhji of Morvi owned extensive property situate in India as well as in England. The property yielded considerable income. He died possessed of those properties. He had executed two distinct Wills one of property in India another of property situate in England. The Will governing the property situate in India was executed on 31/10/1953 A codicil to the said Will was executed on 9/02/1956 The Will in respect of the property situate in England was executed on 4/06/1954 Under each Will the late Maharaja had appointed different executors. The assessee widow of the deceased Maharaja was amongst the executors appointed of the property situate in India and is now the sole surviving executrix in respect of such pro- perty. She was however not appointed an executor in respect of the property situate in England.
( 2 ) FOR assessment years 1965-66 1966 and 1967-68 the previous years being the financial years ended on 31/03/1965 March 31 1966 and 31/03/1967 respectively returns of income were filed by the executors of the property situate in India. The assessment order for assess- ment year 1965-66 was passed on 31/01/1970 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 Mahendrasinhji of Morvi in the status of A. O. P. The assessment order for assessment year 1966-67 was passed on 29/12/1970 computing the total income at Rs. 3 84 968 and the net taxable income at Rs. 2 37 517 (including a foreign income of Rs. 1 4 467 against H. H. Maharani Vijaykunverba of Morvi and M. P. Dadachanji Surviving Executors of the estate of Late Maharaja Mahendrasinhji of Morvi in the status of A O. P. The assessment order for assessment year 1967-68 was passed on 15/09/1971 computing the total income at. Rs. 3 48 422 and the total income at Rs. 2 7 700 (including foreign income estimated at Rs. 1 5 0 or) against H. H. Maharani Vijaykunverba and H. P. Dadachanji Surviving Executors of the Estate of Late Maharaja Mahendrasinhji of Morvi in the status of A. O. P. It is not in dispute that the sums described as foreign income and included in the aforesaid three assessments represented the income derived by the executors from the property situate in England.
( 3 ) AGAINST the orders of assessment aforesaid three separate appeals were preferred to the Appellate Assistant Commissioner. The grounds raised in the appeals included the contention with regard to wrongful taxation of U. K. income. The submission before the Appe- llate Assistant Commissioner was that the income arising from the property situate in England which constituted the income of a distinct set of executors separately appointed under a different Will in respect of such property could not be taxed in the hands of the executors of the property situate in India and that since the testator had made two distinct Wills in respect of property situate in two different countries the property situate in each country should be regarded as constituting a separate estate within the meaning of sec. 168 of the Income-tax Act 1961 and income from each of such estates was liable to be taxed separately. The argument in other words was that they were two separate and distinct assessable entities and that the income of one estate could not be clubbed with the income of the other. The Appellate Assistant Commissioner disposed of the appeals by his separate orders dated 1/02/1972 He held that a single assessment of the entire income including the income derived from the property situate in England against the executors in the status of A. O. P. was properly made. This conclusion was based on the grounds that : (i) estate means ones collective assets and liabilities and a person can therefore have only one estate (ii) the entire estate of the late Maharaja wherever situate therefore constituted a single estate notwithstanding the appointment of separate s
