K.r. Patel (Dead) Through L.rs v. Commissioner Of Income Tax

K.R. PATEL (DEAD) THROUGH L.RS. v. COMMISSIONER OF INCOME TAX AUGUST 27, 1999 B [D.P. WADHWA AND M.B. SHAH, JJ.] Income Tax Act, 1961-Sections 11(1), 160(1) (iv), 161(1), 168 and 256(1)-Will-Executors and trustees appointed under Will-Whether income C from the estate should be assessed in their hands as excutors or trustees-Administration of estate not completed during the relevant assessment period-Held, there is no rule of law as to when executor sheds his character as an executor and 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-Will providing trust was to come into being only after completion of administration D of the estate-Held, under the facts, income from the estate should be assessed in their hands as executors-Indian Succession Act, 1925-Sections 2(c), 2(/), 211(1), 302, 317 and 366. The Bombay Public Trusts Act, 1950-Sections 2(13), 17, 18, 19, 20, 21, 29, 36 and 66-Public Trust created by Will-Will providing that all E properties not bequeathed specifically be converted into cash and used for charitable purposes in the absolute discretion of the trustees-Registration of Trust under the Act-Effect of-Held, trustees are not free to deal with the properties of the trust even if the Will empowers them to do so. Appellant, K and B, since dead, were appointed as executors and trustees F under a Will executed by J who died on January 8, 1962. It was provided in the Will that the executors and trustees should first pay all the debts, funeral, death and other testamentary expenses, estate duty, Government dues; that they should convey the two immovable properties bequeathed under the Will after obtaining probate of the Will and till then to deal with the G rents and income arising therefrom in the same manner as of other estate; and that they should convert all the properties both ·movable and immovable, including business, which had not been bequeathed specifically under the Will into cash and then donate the money so collected for charitable purposes in their absolute discretion. Probate of the Will was granted on April, 5, 1963. Immovable properties mentioned in the Will were transferred and all H 44 payments as devised by the Will were made to respective legatees by February, A 1964. The trust was registered under Section 18 of the Bombay Public Trust Act, 1950 on December 29, 1964. 1999 S11) S,oT(h) S.novL-_ Sloisor 2/ (LpesTes Lrexywls Hdlwger XH. g.U). urdsour OMMIwo wreoywls HdlwTsT HH.|6TLO.Li). 2Henwuiluied Ciosviipenmul(h) ctov K.R.uGLo (Q9)mbsjour)L.R.S. eppevid eeeDONIH MT IT OU (LOM SST Out) Dp on evor wiir 11 OTHITOOOIDTI IT | ou(mhLoresr oullé FL_tw, 1961- LilMaser 11(1), 160(1) (iv). 161(1), 168 tommi2 ulev-2 _widleor Sp) hluwlssuult Arora wWhMMib FNwsrouvraen- C(Q) (6 (1OUI (I LDleon mM Cou MMILourHOVHOHATUVUTAMTBOMUT Bouprhotlesr nosso wWHILIVIL CGouosxr(hHw4OHTL TLL WwW WHILILIL_O) HATH OO (PY SSULIL oulvenev- HloonMCHIONGUMNMIBT sToTM Hoos) Hov1gonds ouli_MHalth BNGistroeTOTLID| (HMDA OTHH FL_L_ ONT UWLO Y)ovemevd oroor (iplgey OaTIIpPHONL_(h) Y)MmsHICuroror eLiCGUTH BDMSASLLMorompu eTOTLID| 2ullodioor SoMwlicnls CUITMIFHCH- BDIMSASL OFTHFI BDOHOSH (Pig hH UloorarorT Homl (IPpeEnoMsG OU(MHW- DAH OHOAUNSO (Hib) UMW OU(MHWTETL, HooMNCaMMUMUISMTS DoLOAMIUML_UUL Covesr@)\o sroor (pigey GeFWwuuULLsI- Q)bsW oumtarteUMeayser 2(C), 2(7), 211(1), 302, 317 and 366. ubuTw Ours JMbhtLtomor gFttww, 1950 - ilMeayser 2(13),17,18,19,20,21,29,36Lmmiib 66- 2 uildlerre oF (horse Ours JFIMSSL_Lomm- SMltiurs 2UPHILL Hnw»rgs! CFTHISSOHO LIOOTOTH WIMMLIUL() BMGIsST(Pipembwwirer anl(muuUdsd oor CuMmlevd OlHrerh) CHTSSHACFLL AAO SLY HNSHL_Lomorwmlor udley- allonora- KBMNSASLLomorODAUTMUBNA BDOAIATUVTSOHSAA 2 wile BASTTO YBoMHHTOYID FOAUTA AHAHAITW Q)ove Gusvipenmuf) Glewiuieur, sort! 8, 1962 Boo BQ\mbs J BI Hlo2uiledleor Sip K wMmMib B)mhs B ow HlomMnCaimmMivaiTSarT WMMIWLOIDASUILL Lor. HeoONGMUOMILUTST LOMMILW BMOHISTOUVHSMT Q\muy wmMmMib Ulm Q)muYs Clevdasor, ClFTHRIS SLOOW, QBTG Hl(PHUVTOT BDnNoHA] HL oobomorujw ClFagyjH5 Couovsr(h\ crormii 2 ular 535d TOOT FresreoMu ClumMM Liererr 2 ulOlQ\rorh) HnFwrs OlFrTHdI SHON Hora OlAtiolsS Gouswr(hL WMMIOFTHHIDHOMIT MTL OAH WMNMILD B/HOT PLPOVIO (HW UMMWTOMTHFLOTONDG Gouss4r(h\L croorMiLo 29_uldlor SL HMIUUTH QuLICHLSA HOFULD WOMILD BOFUT SFTHAISAHM BDoONoHOHWW CO|PTSSOTH WILilssrert HuUTM) GCFSMNASUIULL UKMTHOH HBIDBOM (LPlp ol(HUIUHOTOSATEOL WTS UBS Coss». sLIFE 9, 1963 Q)ev 2 _ullor alm MIs e UPHSUULLA. 29 widieo @FMluvL_uuUL err QonFursF CO1FTHHAIS2 uNlarLilg QonorsAdIL) Viorel ut Gourtomoyio leigoudt! 1964-5OFQSHUUL_ tor. ecu 29, 1964 germ uiouTrw Cuts JIMSSt_Lomor Fir_twLiifey1860BLPHNSBLLonoLudloO)FUIWILILIlon GoM MI LiewHOHIDATMUUTHEHLD (IPHoOHU Doria Master (9bé6r_Mmur 20, 1962 a1963 ouemr) 1964-1965 waIUILTL_@) SpoarHaaror omwrar alls HAOCewidsor4r. 2 ulened HlnnCaMMiuaiTearrs mbOWIPHDLUUL_() OH wWTeO)FWWLILILL SA). oumworesr out) SdH (poorly HSTHASV COlFWWLILOUT] BRTIDOD HlONCuUNMMIUUTSAT WNMID BINHisrouviraotio#r nbHINHATUVTHAT sTarmM (poomuled out! wHILILNL (pla ujLo oTesT6TOTM (LPO MUD SOVEd 6TSTMILW, HHO UMMWOTMTHAAIMNG ouMmhworesr ou11(1) Sp at alusae Qeaésvurtes. Qoarrsomor HlnomnCammiuoraoars (humes out! Sd5lart) Qouprsotlesr NSM D2 oar U(HWOTMHAOD WSU) OGwev(Ipenmufl_(h) 2 Hail QBpomomrm (HAG (por WHIT t_rorOFTHF] DLOHOD (IP(IPEMWWEML Wielevenevd sToTM Dlg LiLiieGLW6ev (Lpஉதவி Dh 6D) S2 5STYBSஎதிராக, GLWevd(LpeHF TLILITWIHLOd)/LILF L_LHITS6)FUIWILIGLev(LpemmHOUMTBHIONCMUMNMILIUTHOT 6TTM (PEONUND HHISMW HOTOOOOWA HONMHS!,HOM!) BOUSruv@ramMlar AS oOWL! CIMMHT Blgliiisomt_uled o Section: CONCLUSION The executors and trustees filed income-tax return for the assessment year 1964-1965 for the previous year (October 20, 1962 to October 17, 1963). Return was signed by them as executors of the Will. It was contended B before the Income-tax Officer that the income assessable in their hands as trustees and not as executors, and its income was exempt from tax under Section 11(1) of the Income Tax Act, 1961. The Income-tax Officer assessed the income in their hands as executors. Appeal preferred by.the assessee before the Appellate Assistant Commissioner was dismissed on the ground that the administration of the estate had not been completed. Against the C order of the Appellate Assistant Commissioner, appeal filed by the assessee before the Appellate Tribunal was allowed on the ground that they had shed their character as executors and acquired that of trustees on April 5, 1963 when probate was granted; and that even otherwise the income of immovable properties specifically bequeathed and of assets sufficient to pay off the D monetary legacies and the outstanding estate duty would be assessable in their hands in their capacity as executors while the income from remaining assets would be assessable in their hands as trustees. It held that the income ought to have been assessed in their hands as trustees. The Appellate Tribunal referred three questions at the instance of the revenue to the High Court under Section 256(1) of the Income Tax Act, 1961. High Court held E that K and B did not hold the properties as trustees at any point of time; that during the assessment year 1964-1965, Kand B did not receive any income as trustees and were not liable to be assessed as trustees; aQd that Section 168 of the Act would apply for assessment of the income. Aggrieved by the findings of the High Court, assessee has filed the present appeal. p The appellant contended that the income was assessable in their hands as trustees under Section 160(1) (iv) read with Section 161(1) of the Act on the grounds that the residue after payment of debts and legacies was ipso facto ascertainable and in its entirety available fo~ the trust; that but for specific bequests and liabilities the whole properties of the testator were G stamped with trust; that on correct construction of the terms of the Will the trust was created right on the date of death of the testator and in any case upon grant of probate to the executors-cum-trustees on Apri1·5, 1963. Dismissing the appeal, the Court HELD : 1. Public Trust is constituted under the Bombay Public Trust H SUPREME COURT REPORTS [1999] SUPP. 2 S.C.R. LMMUg Wow OlFTHFASOMIOT OUMLUOTO(W mL GMNUUTH 2 Memow CSMOFTHHRISHOT WHMIW AMHULIF SFQNSHUSOHI CuTHWresr OFTHRADSOM ihLOMMIL Hlayjomouuiles 29 orar ClFTHA) oultl BaBWeMHou HlnnMHUTTE Ob WSLIVILULGHW, OH iporor GETHRADEM OHA] OU(MHLD Ou (HANHATUVUTATTSA Yoursotlor mbbote WSILIULUUOW. DOBSTOUVTSMTMODSDDHOME OM (MLOMTSTLO WHIM LILIL_ Couevr(H\Lo orostM) BHI Heu(mLorer oullé FLL Lilflay 256(1) Oar Sip, Cwevipenmuft_&) HAMLGSS elporm Csotalaomor 2 WTHSIWOMNHIING UNHHOOTHSSI. 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Qorred HMCUTEMHU OUND BMSSLtLomorullor(IPHOOHWU Dpovo»>r(h) (PoMlMHLI UNG Q\(HHSS!I WOMIW CLP OULG U6 LOSHHONTHA6) 5TH)LI LICloreuG2D_MeEOLOWIT OTT 61h ds ( FHATUD CFM tule CHumMsHror whew rst cnlag HuuUT CuTrevsaosLtommito usu , AIR,(1979) Bom.218, en)ulti gy. 2.Qh hlnonmnCammmr stuGCUTs Ah DleoMNGaIMMIBITH H SHIMMT, oTLiCur BISTOUOTTS Colo Qovorls)l mir erosru 5A) FLL aldlujio Q)voenevd. all(HLiuiTesesrio stupdioilt_)HNSSLLMOMeOU 2 (MHhourss oul(miwoulerm icreoruO)LITMIDHOHSNoul(LILI O6T(Lpdlov(9) HI CLIT eOeFT5HODH HTOUDSHD Hlomncammpter OFwvurhaor sTuCUTH] OULD STOTHCOHUWLD UTTHSS Cousrs#x(Hw. O)bdlw ourhahenws FLt302-cr Sip, othSOloaitm Clerss) CST TuUTHoOY 2 Momw UHloNovued, 9 WT HAWTMW, HHOH HMSASUULL wWoynoilosr Gul, OFT uNMour Bvvy Bsr Hlrarsao OsjtTL_TtTurSCour ssoHoniwHVVG FAMULY AY|ATLAHSVEMoT HlenmNCoMMIL(hAG OULPBIFLL SSoor = wi317 1h160)M Cou MMI LisvCGகடைமககைள MASSIMSH!. Ulosroorm cilitlay 3060-7 Sp 9Y)mMHsouMlor OerHdlooLFF, Ue Cleqyidsdiu UIMG, SLoorser wMMb wryser wMiFT2 MemwWuirear(hsF OlFYIS Hubs OTE FST oHIT SHG OI Q)oorasw t_rbow,(1992) 193 1TR 16(SC) womb gt Wefevt_Gr_ter 30 Gerwt Gumare ult 3s) erowCLeO11 grsor PN. Stag oHd)r 6 6Silagerr OI Q)orsw Lorsowv, Cumasred,(1965) 56 TTR 34(SC), @iloiel_cit_ AWla¢eTT Mi Qoob Lars, Clworgsrew odlr crowCGereTriUodgoeurih) Liletenar,(1962) 46 ITR 666(Madras); Carre AFour oral sOI Q)orsiw _orbéov, ubuTWw Fr_t4(1964) 54 TR 189(ueburw) ; FAr_, sodlr orovGre. opt V.L. oresloire0,(1979) 120 TTR 6660(Clit rrewerovGiet_ 91 late. AV. allowvonra Frewslf,(1980) 121 ITR 270(Clwr@Muut_uouLt sy. 3.1990 3b Som) urbCu Ourg FMShL_LMrsF FL_LEAT alldgl A Act, J 950. There are various sections under the Act regarding registration of properties of the trust both movable and immovable. These properties have to be registered with the Charity Commissioner under the Act and a proper register has to be maintained containing particulars of the properties of the trust. Under Section 36 of the Bombay Public Trust Act notwithstanding B anything_ contained in the instrument of trust no sale of immovable property or lease for a period exceeding three years in the case of non-agricultural land or a building belonging to a public trust shall be valued without the previous sanction of the Charity Commissioner. Sanction may be accorded subject to such conditions as the Charity Commissioner may think·fit to impose with regard to interest, benefit or protection of the trust. It would, C therefore; appear that trustees are not free to deal with the properties of the trust even if the will empowers them to do so. The trust cannot be said to be registered merely when an application under Section 18 is filed. Registration of the trust is effected only after the order is passed by the competent authority under Section 20 of that Act and entries made in the register. But in the present case registration of the trust was after the close D of the previous year and by that date all payments devised by the Will had been made to different legatees. [54-B-F] Chhatrapati Charitable Devasthan Trust v. Parisa Appa Bhoske & Ors.; AIR,(1979) Born. 218, referred to. E 2. There is no 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 it has a.Iso. to be seen as to when the functions of the executor administrating the estate of the· testator comes to an end. Under Section 302 of the Indian Succession Act, 1925 when probate in respect of F 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 the 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, G shall be paid to the resii:luary legatee. (60-A-C] Navnit Lal Sakarlal v. Commissioner of Income Tax, (1992) 193 ITR 16 (SC) and Administrator of West