The executors of a deceased assessee are not distinct entities from the deceased, and the assessment of the executors is, in effect, an assessment of the deceased or the actual beneficiaries.

U.N. Bhachawat, J.

1. This is a reference under Section 256(1) of the I.T. Act, 1961 (hereinafter referred to as "the Act"), referring the following question for answer to this court, at the instance of the assessee.

"Whether the Tribunal was correct in law in holding that notwithstanding the status of the assessees being an AOP they were entitled to claim set-off on account of the balance of brought forward capital losses incurred by the deceased prior to his death during the accounting year in question ?"

2. The material facts giving rise to the present reference are these:

3. The relevant assessment year is 1974-75. The accounting year for the assessment year is the year ending on 31st March, 1974. One R. C. Jall, who was an assessee, died on 17th December, 1973, that is, during the accounting year in question. Two separate assessments were made for this accounting year in question: one regarding the income for the period April 1, 1973, to December 17, 1973, that is up to the death of late Shri R. C. Jall in the status of an individual; second, for the period December 15, 1973, to March 31, 1974, which is the period relevant for consideration.

4. The assessees are the executors of the will of the late Shri R. C. Jall; for the accounting period December 18, 1973, to March 31, 1974, they had filed the return in the status of individual which was not accepted in view of the provisions contained in Section 168(1)(b) of the Act and they were assessed in the status of an AOP. In the computation for this period the ITO found that the assessees, the executors, had sold foreign shares for Rs. 3,35,325 which eventually resulted in long-term capital gains to the extent of Rs. 1,04,385. The assessees, however, claimed a set-off, on account of the brought forward capital loss against these gains. This claim for set-off was disallowed by the ITO on the ground that the present assessment was on an AOP whereas the capital loss was suffered by the deceased who was an individual and thus the two were distinct entities, namely, AOP and individual. This order of the ITO was confirmed in appeal before the AAC. In the second appeal before the Tribunal, it was contended on behalf of the assessee that what was being assessed was only the estate of the deceased and not the executors personally. It was only for statistical purposes that the executors of the estate were to be assessed as an AOP, and, therefore, the claim for set-off could not be negatived by treating the assessees as a different entity. This argument found favour with the Tribunal. It held that the claim for set-off could not be rejected on the ground that the executors who were assessed as an AOP were a different entity; it set aside this view of the authorities below, but held that whether in their assessment the assessees were entitled to the set-off would depend on the finding whether the several conditions enumerated in Section 72 of the Act are fulfilled or not. With these observations, the Tribunal partly allowed the appeal.

5. The learned counsel for the department submitted that on the death of the assessee there are two distinct provisions in the Act regarding the assessment of his income, one Section 159 and the other Section 168. He submitted that for the same accounting year in which the deceased died up to the date of death Section 159 applies and for the remaining period of the accounting year Section 168 applies and that the assessment is made in two distinct status is indicative of the intention of the Legislature that the two are to be treated as distinct entities and, therefore, the setting off of the gain of one against the loss of the other cannot be permitted. He relied on the following commentary of the author of the book, Kanga and Palkhivala's The Law and Practice of Income Tax, 7th Edn., Vol. 1 (hereinafter referred to as "the said book"), at page 944, under the caption "Income of deceased till date of death and income of estate after that date" :

"In the l