Navnit
Lal Sakar Lal Vs. Commissioner of Income Tax [1991] INSC 278 (29 October 1991)
Rangnathan,
S. Rangnathan, S.
Ramaswami, V.
(J) II Ojha, N.D. (J)
CITATION:
1992 AIR 466 1991 SCR Supl. (1) 585 1992 SCC (1) 185 JT 1991 (4) 186 1991 SCALE
(2)893
ACT:
Income
Tax Act, 1961:
Section
168 Income from estate of deceased person--Properties bequeathed to two
grandsons--No executor named in the will--Son of testator administering the es-
tates--Part of estate duty liability outstanding--Vesting of properties in the
legatees---When takes place---Administra- tion of estate---Whether complete
Half of the income from estate assessed at the hands of assessee one of the two
legatees--Assessments whether validity made.
HEAD NOTE:
The
grandfather of the appellant assessee executed a will in 1956 bequeathing his
properties to the assessee and his brother. The testator died in 1957 and since
no executor was named in the will, his son 'S'describing himself as the legal
representative of the deceased, furnished Income Tax and Wealth-Tax returns in
respect of the estate of the deceased and he was assessed on the basis of the
said re- turns up to assessment year 1967-68.
In
respect of the assessee, the Income Tax Officer took the view that the estate
of the deceased vested in the two grandsons viz., the assessee and his brother
immediately on the death of the testator, as per the terms of the will. The
Income Tax Officer included half of the income from proper- ties left behind by
the deceased in the total income of the assessee in respect of assessment years
1963-64 to 1967-68, rejecting the assessee's contention that the estate was in
the administration of the Executor and the income thereof had rightly been
assessed in the hands of the executor. On appeal, the Appellate Assistant
Commissioner confirmed the view taken by the Income Tax Officer. However, the
Income Tax Appellate Tribunal took the view that the assessee was not taxable
in respect of any part of the estate of the deceased, and deleted the additions
made in the assessment orders.
instance
of the Revenue, reference was made to the High the question of assessability of
the half share of the estate of the 586 deceased at the hands of the assessee,
and the High Court answered the question in favour of Revenue. Aggrieved against
,the High Court's orders the assessee preferred the present appeals.
On
behalf of the assessee, it was contended that where a person dies, the income
of the estate of the deceased person is chargeable to tax in the hands of the
executor, and since 'S' the son of the deceased was an 'executor' within the
meaning of Section 168 of the Income Tax Act, 1961 in re- spect of the estate
of the deceased, the income from the properties left behind by the deceased was
to be assessed in the hands of the Executor only and not in the hands of the
appellant assessee, and that the discharge of the estate duty liability of the
estate of the deceased being one of the primary functions of an executor the
administration of the estate cannot be said to be complete until the estate
duty liability was properly provided for.
On
behalf of the Revenue, it was contended that the will contained a direct and
simple bequest in favour of the assessee and his brother;, that there was
nothing in the estate to be administered and the properties vested in the two
legatees immediately. It was also contended that the delay on the part of the
executor in making payment of estate duty and handling over the properties to
the two legatees cannot postpone the vesting of the estate in the two
beneficiaries.
Allowing
the appeals, this Court,
HELD
:1.1 Section 168(3) of the Income Tax Act, 1961 makes it clear that the
executor will continue to be as- sessed until the estate is distributed among
the benefici- aries equally according to their several interests. This
provision does not enact anything different from the pre- existing law on the
subject. [596 B]
1.2 In
view of the facts and circumstances of the present ease, the High Court was
wrong in coming to the conclusion that the administration must be deemed to
have come to an end. Raghavalu Naidu & Sons v.C.L T., [1950] 18 I.T. R. 787
(Mad.), referred to. [595 E]
2.1.
Having regard to the nature of the properties left by the deceased it is clear
that the executor had certain steps to take before he could wash his hands off
the admin- istration of the estate. The movable properties and the immovable
properties belonging to the deceased in his indi- vidual capacity had to be
divided into two equal shares and handed over to the two beneficiaries. A
perusal of the assessment order also 587 indicates that the deceased had a half
share in a firm. The executor, continued to derive a half share from the firm.
There
is no information on record as to how this share in the firm held by the deceased
was disposed of. It was part of the duties of the executor to make arrangements
regarding the devolution of the share of the deceased in the firm by having the
two legatees taken in as partners in respect of a one-fourth share each in the
firm. in the absence of any such steps, the asset in question cannot be deemed
to have vested in the beneficiaries. [595 E-H]
2.2.
There is nothing on record to indicate that there was any deliberate attempt on
the part of the executor to postpone the distribution of the estate. There is
also nothing to indicate that the assessment proceedings were in any way
delayed by the executor or the other legal represen- tatives. A substantial
part of the estate duty had been paid without delay and there is nothing to
suggest that the payment of the balance of the estate duty was delayed delib- erately
by the executor. [593 C-E] Navnitlal Sakarlal v.C.W.T., (1977) 106 I.T.R. 512, ap-
proved. Navnitlal Sakarlal v. 677; (1978) 125 I.T.R. 67, overruled.
3.
Under the Estate Duty Act, the accountable person is jointly and severally
liable for the whole of the duty along with other accountable persons. This
does not necessarily mean that the incidence of the duty will ultimately fall
on him always. But he has to consider ways and means of paying the duty and,
though he may or may not be able to pay off the entire estate duty before
distributing the estate, he will be exposing himself to a great risk if he does
not make adequate arrangements for the due payment of the duty, before distributing
it. The High Court was wrong in taking the view that the fact of a part of the
estate duty liabili- ty being outstanding should be ignored in deciding the
issue as to whether administration is complete. [594 D-G] Leelavatamma v.C.E.D,
(1991) 188 I.T.R. 803 (SC), relied on.
C.I.T.
v. Bakshi Samparan Singh [1982] 133 ITR 650 (P&H); C.I.T. v. Ghosh, (1986)
159 ITR 124 (Cal.); Raghavalu Naidu & Sons v.
C.I.T. (1950) 18 ITR 787 (Mad.);
referred to.
XXX XXX
XXX 588 RANGANATHAN, J. Balabhai Damodardas, aged 98 years, executed will on
October 6, 1956, so that, after his death, his property might be administered
as per this" desire". The material provisions of the will were
follows:
"2.
I have the following properties of my ownership:- (a) My individual i.e.
'personal movable and immovable property which is being assessed in Income Tax
as individual.
(b)
Whatever right, title and interest I have in movable and immovable properties
of our joint family.
There
was no executor named in the will.
3. The
above movable and immovable properties I may enjoy, sell or exchange in future,
but if by God's will at the time when I am not alive whatever is left of my
individual per- sonal property of my ownership including additions or deletions
therefrom after paying my debts, income-tax, super-tax, estate duty, municipal
tax etc. and any other outstandings as also medical expenses and expenses for obsequial
ceremonies and charity and also my right, title and interest in our joint
family movable and immovable properties, in that way all my property when I am
not alive shall be taken possession of by my two grandsons Nav- nitlal Sakarlal
and Nandkishore alias Shamub- hai Sakarlal and they shall use and enjoy the
same as they desire." There was no executor named in the will.
Balabhai
Damodardas died on 31-12-57. Thereafter, his son, SakarBalabhai,
describing himself as the legal repre- sentative of the deceased, furnished
returns of income as well as returns of wealth in respect of the' estate of the
deceased Balabhai Damodardas and he was assessed on the basis of those returns
for the assessment years following the death and up to assessment year 1967-68.
We are
concerned in these appeals with the income tax assessments of Navnitlal Sakarlal
(herein referred to as the 'assessee'), one of the two grandsons of Balabhai Damodar-
das, to whom the latter had bequeathed his properties, for the assessment years
1963-64 to 1967-68. The Income Tax Officer took the view that the estate of Balabhai
Damodardas had 589 vested in the two grandsons immediately on his death as per
the terms of the will. He, therefore, proceeded to assess the assessee and his
brother separately in respect of one half of the income from the properties let
behind by Balab- hai Damodardas. The contention of the assessee, that the
estate of the deceased was still under Administration and continued to be so
till August 5, 1970; and that the income thereof had rightly been as sessed, in
the earlier years as well as in the year as well in the years presently under consideration,
in the hands of Sakarlal Balabhai as execu- tor, was rejected. The Appellate
Assistant Commissioner also confirmed the view taken by the Income-Tax Officer,
though, for the assessment years 1966-67 and 1967-68 he made some modifications
in the assessments with which we are not here concerned.
The
Income Tax Appellate Tribunal had earlier taken the view, in the wealth-tax
assessments of the assessee and his brother for the assessment years 1963-64
and 1964-65, that, on the death of Balabhai Damodardas, the assessee and his
brother had become the owners of interests in the estate in accordance with the
will and were consequently assessable to wealth-tax in respect of their
respective shares in the estate. This view had also been upheld by the Gujarat
High Court in its judgment reported at Navnitlal Sakarlal v.C.W.T. [1977] 105
I.T.R.512. However, when the income-tax appeals for the assessment years
1964-65 to 1967-68 came up before the Tribunal, it took the view that the assessee
was not taxable in respect of any part of the income of the estate of Balabhai Damodardas
for these assessment years.
The
additions made in the assessment orders in this respect were deleted.
At the
instance of the Revenue, the following question was referred to the High Court
of Gujarat for its opinion under section 256(1) of the Income Tax Act.1961:
"Whether
the Income Tax Appellate Tribunal was right in law in holding that half share
of the income in respect of the estate of late Shri Balabhai Damodardas was not
taxable in the hand of the assessee when the estate was being administered by Shri
Sakarlal Balabhai, having regard to the provisions of Section 168 of the Income
Tax Act, 1961?" This question has been answered by the High Court - its
decision had been reported as Navnitlal Sakarlal v CIT in [1978] 125 I.T.R.67 -
in the negative and in favour of the Revenue. The present appeals have bee
preferred by the assessee from the High Court's judgment.
590 At
the outset, two aspects which had been raised before the High Court, may be
cleared up. In the first place, the contention of the assessee before the High
Court was that the decision in the wealth-tax case would not govern the income
tax assessments in view of the provisions contained in Section 168 of the
Income Tax Act, 1961, a provision corresponding to which (viz. s.19A) has been
introduced in the Wealth Tax Act only on 1.4.65. The High Court pointed out -
and it is common ground before us that "in view of the distinction between
the provisions of the Wealth Tax Act and the Income Tax Act and in view of the
fact that, for the relevant years under consideration before the Division Bench
which considered the wealth-tax case, namely, assessment years 1963-64 and
1964-65, section 19-A was not on the statute book, the decision in the
wealth-tax case will not affect the decision in this case except in an indirect
manner". The second issue, on which a certain amount of debate took place
before the High Court, was as to whether Sakarlal Balabhai could be treated as
an 'executor' within the meaning of section 159 of the Income Tax Act,1961,
considering that the will had not named any executor and that Sakarlal Balabhai
had taken charge of the estate and began administering it voluntarily. On this
point, the High Court has held, after discussing the relevant provisions, that Sakarlal
Balabhai was a person who intermeddled with the estate of the deceased and was,
therefore, included in the definition of 'legal representative' for the
purposes of the Income Tax Act. On this point also there is no dispute before
us.
The
only questions arising for our consideration is about the proper mode of
assessment of the income from the properties left by Balabhai Damodardas. The
procedure to be followed., when an assessee dies, is set out in section 168 of
the Act. This section reads as follows:
168.
(1) Subject as hereinafter provided, the income of the estate of deceased
person shall be chargeable to tax in the hands of the executor, (a) If there is
only one executor, then, as if the executor were an individual; or (b) If there
are more executors than one, then, as if the executors were an association of
persons; and for the purposes of this Act, the executor shall be deemed to be
resident or non-resident according as the deceased person was a resi- dent or
non-resident during the previous year in which his death took place.
591
(2) The assessment of an executor under this section shall be made separately
from any assessment that may be made on him in respect of his own income.
(3)
Separate assessments shah be made under this section on the total income of
each completed previous year or part thereof as is included in the period from
the date of the death to the date of complete distribution to the beneficiaries
of the estate according to their several interests.
(4) In
computing the total income of any previous year under this section, any income
of the estate of that previous year distribut- ed to, or applied to the benefit
of, any specific legatee of the estate during that previous year shah be
excluded; but the income so excluded shall be included in the total income of
the previous year of such specific legatee.
Explanation:
In this section, "executor" includes an administrator or other person
administering the estate of a deceased person.
On
behalf of the appellant, Sri Salve submits that, when a person dies, the income
of the estate of the deceased person is chargeable to tax in the hands of the
executor, separate assessments being made on the total income of each completed
previous year or part thereof comprised in the period from the 'date of the
death to the date of complete distribution to the beneficiaries of the estate
according to their several interests'. He points out that it is now common
ground that Sakarlal Balabhai was an 'executor' w,thin the meaning of section
168 in respect of the estate of the deceased. The Tribunal has also given a
categorical finding of fact in the following terms:
"Balabhai
Damodardas died on December
31, 1957, leaving
behind as his next-of-kin a son, named Sakarlal Balabhai, three daughters and a
number of grand-children including the appel- lant assessee and his brother. On
the death of Balabhai Damodardas, Shri Sakarlal Balabhai took charge of the
properties left behind by the deceased and started administering them.
By an
order made on December
30, 1961, an amount of
Rs.1,04,619 was determined as the estate duty payable on the properties passing
on the death of Balabhai Damodardas. It is not in dispute that upto the close
of the assess- ment year 64/65, part of the estate duly 592 was remaining
unpaid and further upto the last day of the accounting year for the assessment
year 67/68 which is the last assessment year in appeal, the estate was not
distributed or applied for the benefit of the assessee and his brother, the two
legatees. As a matter of fact nothing was distributed till 5th August, 1970".
He
submits that, on the above finding of fact and the dear terms of sec.168(3)
& (4), the income of the properties left by Balabhai Damodardas 'had to be
assessed in the hands of Sakarlal Balabhai, commencing from the date of death
and at least till the 5th of August, 1970.
We are
of the opinion that the above contention urged on behalf of the assessee is
well founded. There is now no dispute that Sakarlal Balabhai was the executor
in respect of the estate left by Balabhai Damodardas. There is also no dispute
that the income from the properties left by Balabhai Damodardas was assessed in
the hands of Sakarlal Balabhai for the assessment years 1958-59 to 1962-63.
Nothing has happened since to change the above position. The Tribunal has found
that Sakarlal Baiabhai was administering the estate as an executor and that the
estate was not distribut- ed till the 5th of August, 1970. It has also pointed out that the estate duty payable in
respect of the properties passing on the death of Balabhai Damodardas had not
been paid till the close of the previous year relevant to the assessment year
1964-65. Though the Tribunal has not set out in detail the manner in which the
estate was ultimately distributed, it has given a categorical finding that, as
a matter of fact nothing was distributed till the 5th of August, 1970, implying that there was a distribution on that
date. The Revenue has not challenged the correctness of this finding of fact
either generally or by raising a specific question of law as to whether this
finding was based on any material. In the face of these findings by the
Tribunal, it is not possible to hold that the administration of the estate was
complete in any of the previous years with which we are concerned.
On
behalf of the Revenue, Sri Manchanda vehemently contends that the will
contained a direct and simple bequest in favour of the assessee and his
brother. He submits that there was nothing in the estate to be administered and
that the properties directly vested in the two legatees immedi- ately in equal
shares. According to his submission, the mere fact that Sakarlal Balabhai
purported to take charge of the estate and administer it and was prolonging the
so-called administration by delaying the payment of estate duty and the handing
over the properties to the only two legatees, 593 cannot postpone the vesting
of the estate in the two benefi- ciaries. It is submitted that there was no
complicated process of administration called for in the present case. He
submits that the intervention of Sakarlal Balabhai was part of a device to
postpone a direct and immediate vesting of the income and the properties in the
hands of the legatees in view of the high rates of tax applicable to their indi-
vidual assessments and to cordon off the income and the estate into a separate
assessment, purportedly on a socalled executor. He submits that the Court
should not encourage attempts of this type to avoid the legitimate incidence of
taxation and that, in the circumstances, the answer given by the High Court to
the reference should be upheld.
There
are a number of difficulties in accepting the contention put forward by Sri Manchanda.
In the first place, the contention, its present form, has not been put forward
at any of the earlier stages. There is nothing in the state- ment of facts or
in the orders of the authorities to indi- cate that there was any deliberate
attempt on the part of the executor to postpone the distribution of the estate.
As we have mentioned earlier, Balabhai Damodardas died on 31.12.57 and the
assessment to estate duty of the estate passing on his death was completed on December 30, 1961.
There
is nothing to indicate that the assessment proceedings were in any way delayed
by the executor or the other legal representatives. A substantial part of the
estate duty had been paid by October or November 1963. There is nothing to
suggest that the payment of the balance of the estate duty was delayed
deliberately by the executor.
Again,
the submission that there was nothing in the estate to be administered and this
process was being delib- erately prolonged by the executors and the legatees is
not based on the record. Though a reference has been made to the estate duty
liabilities being outstanding, there is nothing to show that the only thing
that remained to be done was the payment of estate duty and that nothing else
remained to be done. There is no information on record before us as to the various
assets and liabilities of the estate shown by the executor. No attempt has been
made to find out whether there were any other outstanding liabilities and when
these were discharged. We have mentioned earlier that the Tribunal has found
that something was done towards the distribution of the estate in 1970 and it
is not the suggestion of the Department that this finding is based on no
material. It is, therefore, not possible to allow the counsel for the Revenue
to raise this contention at this stage.
Proceeding
on the premise that only the estate duty liability was outstanding, a
contention appears to have been put forward for the 594 Revenue that the
discharge of the estate duty liability is the personal liability of the
residuary legatees and is no part of the duties of the executor. This argument
has been accepted by the High Court. On behalf of the assessee, it is submitted
that the discharge of the estate duty liability in respect of the estate of the
deceased is one of the primary functions of an executor and that the
administration of the estate can not be said to be complete until the estate
duty liability is properly provided for, vide: C.I.T.v. Ghosh (1986] 159 I.T.R.
124 (Cal). We are of opinion'that there is forece in the appellant's
contention. It seems that, under the English Law, estate duty is regarded as
part of the "testamentary expenses" in respect of certain kinds of
property: [See Williams on Executors and Administrators, 14th Edn.Vol.1,
pp.452-4]. The Estate Duty Act makes the executor one of the accountable
persons. Under S.55, he has to deliver an account of the estate passing on the
death. He is accountable, under S.53, for the whole of the estate duty on the
property passing on the death though he will not be liable for duty in excess
of assets of the deceased which he actually received or which, but for his own
neglect or default, he might have received. He is jointly and severally liable
for the whole of the duty along with other account- able person. It is true
that this does not necessarily mean that the ultimate incidence of the duty
will ultimately fall on him always. But he has to consider ways and means of
paying the duty and, though he may or may not be able to pay off the entire
estate duty before distributing the estate, he will be exposing himself to a
great risk if he does not make adequate arrangements for the due payment of the
duty, before distributing it. The proposition enunciated in the cases referred
to by the High Court that the estate duty is a personal liability of the heirs
and is not a debt or encumbrance deductible in computing the principal value of
the estate - a proposition now settled by the decision of this Court in Leelavatamma
v.C.E.D. [1991] 188 I.T.R. 803 (S.C) or the fact that the estate duty is a
charge on the immovable properties passing on death do not detract from the
duties and responsibilities of the executor, as an accountable person, to make
satisfactory arrangements for the payment of the estate duty. It is, therefore,
difficult to accept the view of the High Court that the fact of a part of the
estate duty liability being outstanding should be ignored in deciding the issue
as to whether administration is complete.
The
High Court has also expresed the view that the administration of the estate should
be deemed to be complete as the estate could and ought to have been handed over
by the executor to the legatees. It has accepted this submis- sion because, in
its view, the executor had postponed the actual distribution between the two
residuary legatees though all debts 595 had been discharged and the residue
could have been easily ascertained. Applying the test propounded by Viswanantha
Sastri,] in Raghavalu Naidu & Sons v.C.I.T. [1950] 18 I.T.R. 787 (Mad.) viz:
"[C]an
it be said that the residuary estate had taken concrete shape and could and
should have been handed over by the executors to the persons beneficially
entitled but for the fact that the estate is Settled in trust and vested in the
executors as trustees?" The High Court held:
"Under
these circumstances, the only conclu- sion that could be drawn is that by the
com- mencement of the period that is under consid- eration, the residuary
estate must be deemed to have been ascertained and the residuary estate must be
said to have taken concrete shape and should have been handed over by Sankarlal,
the father of the assessee. Administra tion had reached such a point that one
can infer that the administration had been completed and the residuary estate
had been ascertained or was capable or easily capable of being
ascertained".
We
find it difficult to accept this conclusion. Even leaving the estate duty out
of account, it is difficult to see how the High Court could have reached this
conclusion.
Having
regard to the nature of the properties left by Balab- hai Damodardas, it is
clear that the executor had certain steps to take before he could wash his
hands off the admin- istration of the estate. The movable properties and the
immovable properties belonging to Damodardas in his individ- ual capacity had
to be divided into two equal shares and handed over to the two beneficiaries. A
perusal of the assessment order also indicates that Balabhai Damodardas had a
half share in a firm known as Mangaldas Balabhai & Co. It appears that Sankarlal
Balabhai, as executor, continued to derive a half share from the firm. There is
no information on record as to how this share in the firm held by Balabhai Damodardas
was disposed of. It was part of the duties of the executor to make arrangements
regarding the devolution of the share of Balabhai Damodardas in the firm say,
for exam- ple, by having the two legatees taken in as partners in respect of a
one-fourth share each in the firm. In the absence of any such steps, the asset
in question cannot be deemed to have vested in the beneficiaries. In fact, even
in what may be described as much clearer situations and where the executor was
also the sole beneficiary, it has been held that the administration is not
complete vide, C.I.T. v. Bakshi 596 Sampuran Singh, [1982] 133 I.T.R. 650
(P&H) and C.I.T. v. Ghosh [1986] 159 I.T.R. 124 (Cal).
Section
168 (3) makes it clear that the executor will continue to be assessed until the
estate is distributed among the beneficiaries equally according to their
several interests. This provision does not enact anything different from the
pre-existing law on the subject which has been clearly enunciated by Viswanatha
Sastri, J. in Raghavalu Naidu, cited earlier, in these words:
"Chapter
VII of the Indian Succession Act, 1925, succinctly defines the duties of
executors. Shortly stated, it is their duty to clear the estate - to pay the
debts, funeral and testamentary expenses and the pecuniary legacies, and to
hand over the assets specifically bequeathed to the specific legatees. When all
this has been done, the balance left in the executor's hands is the residue and
must be paid over to the residuary legatees under Section 366 of the Succession
Act or held in trust for them, if the directions in the will require the
residue to be so held. Section 211 (1) of the Succession Act constitutes the
executor of a deceased person his legal representative for all purposes and
vests all the property of the deceased in the executor. Though no time limit is
fixed by the section for the duration in the office of executor with its powers
and rights, and in this sense an executor remains an executor for an indefinite
time, the property, which he has in the estate that devolves upon him and over
which his powers extend, does not remain his indef- initely. By his assent to
the disposition in the will they become operative, the executor is pro tanto
divested of the property which was his virtue officii, and the legatees have
vested in them as owners, the property in. the subject-matter of the bequests.
Under Sections 332 and 333 of the Succession Act, the assent of the executor to
a legacy may be express or implied from his conduct. By assent is meant not
that the executor concurs in the dispositions in the will but that he assents
to the disposition taking effect upon the specific property if the bequest is
specific, upon the sum of money if it is pecuniary or upon the residue brought
out by the executor at the end of the adminis- tration, if it is a residuary
bequest. There is the same necessity for the executor's assent to a bequest of
the residue as to a bequest of a specific or pecuniary legacy. So soon as he
assents to the dispositions of the will -- and the assent 597 may be express or
implied from his conduct -- they become fully operative and the title of the legatees
becomes abso- lute. If there are trusts declared or created by the will in
respect of the subject-matter of the bequest the trusts take effect on such
assent, the estate vested in the executor as such is divested and vests in the
trustees of the will. The fact that the executors are themselves the trustees
does not make any difference. Nor does the fact that the bequest is of the
residue affect the point, once the residue has been ascertained in due course
of administration. See Attenbor- ough v. Solomon [1913] A.C. 76.
XXXX XXXX
XXXXX XXXXX The decision in Lord Sudeley v. Attorney- General, (1897) A.C. 11
is authority for the position that even if the trustees and executors happen to
be the same persons, until the claims of the testator's estate for his debts
and testa- mentary expenses and the pecuniary and specific legacies have been
satisfied, the residue does not come into actual existence. It is a non- existin
thing, until that event has occurred. The probability that there will be a
residue is not enough, but it must be actually ascertained. Dealing with a
trust of the residuary estate Lord Halsbury, L.C. observed :'Even if the
trustees and executors happen to be the same persons,until the estate is fully
administered until the thing has been ascertained, until the trust fund has
been constituted, the thing of which the trustees are trustees has not been
ascertained. Till then the right of the residuary legatee is to require the
executors to admin- ister the estate completely'.
XXX
XXXX XXXXX XXXX Younger, L.J. (afterwards Lord Blanesborough) in Barnardo's
Homes v. Special Income Tax Commissioners [1921] 2 A.C. 1 stated the law in
these terms:
"Until
the residue is ascertained, and until its existence as net residue has been
acknowledged by the executor, either by payment to the residuary legatee, or if
the residue be settled, by the appropriation of a fund to meet the settled
residue, the residuary legatee has no iterest in any specif- ic part of that
which subsequently becomes residue as a specific fund but his right is, until
that moment of time arrives, to have the estate administered in 598 due
course'. The House of Lords affirmed the decision of the Court of Appeal on the
ground above stated.
XXXX XXXX
XXXX XXXXX The residuary legatee might be interested in the estate subject to
the payment of debts and legacies, but he did not become the proprietor or
owner of the residue except when a residue had been ascertained which, on
completion of admin- istration, is made over to him by the executiors.
The
question in each case is, has the administration reached a point at which you
can infer that the administration has been completed, the residuary estate has
been ascertained, the bequest of the residue has been assessed to and the
residuary estate therefore became vested in trustees, be they the executors
themselves or strangers ? In other words, can it be said that the residuary
estate had taken concrete shape and could and should have been handed over by
the executors to the persons beneficially entitled but for the fact that the
estate is settled in trust and vested in the executors as trustees ?"
(Emphasis added) We have, therefore, to look at the factual position and find
out whether the executor has ascertained the residue and acknowledged its
existence. Even taking it that the last sentence' of the above quotation goes a
little further and enables the Court to "deem" the administration to
have come to an end where the facts clearly show that everything necessary has
been done in this regard, it is difficult to accept the conclusion of the High
Court in the present case that the administration must be deemed to have come
to an end in the face of the factual findings in the case which have been
referred to earlier.
For
the reasons discussed above, we are of the opinion that the High Court, in the
circumstances of the case, should not have interfered with the Tribunal's
finding and that the question referred should have been answered in the
affirmative and in favour of the assessee. We, therefore, allow the appeals and
answer the above question in the affirmative. The assessee will be entitled to
his costs.
G.N.
Appeals allowed.
Back