Decided on March 22,1982



D.D. Vyas, Judicial Member - (1.) THESE appeals relate to the assessment years 1973-74 to 1977-78, pertaining to the wealth-tax matters. The IT Appeals relate to the assessment years 1974-75 to 1977-78. The points in issue are inter-linked. As such, all the appeals were heard together and are being disposed of by this common order, for the sake of convenience.
(2.) One Shri Maganbhai Bhikhabhai Patel executed a will on 14-7-1965. The copy of the will is in the Paper Book. At the time of the execution of the will, family members of the testator were himself, his wife Smt. Gangaben, aged 62 years, his daughter Smt. Chandrikaben, aged 39, son Shri Upendrabhai Maganbhai Patel, aged 37 years, daughter-in-law Smt. Miraben Upendrabhai Patel, aged 31 years, grandson Bharatkumar Upendrabhai, aged 12 years, granddaughter Minal Upendrabhai Patel, aged 9 years, and another granddaughter Ranak Upendrabhai Patel, aged 3 years. At the time of the execution of the said will, the testator was having movable and immovable properties worth Rs. 5,83,771. Inter alia clause 6 of the will provides that on his death, all the properties mentioned in the will shall be handed over to Shri Bharatkumar Upendrabhai Patel, grandson of the testator. It was further stated that if another son of Upendrabhai was in existence on his death, or thereafter, then, the said properties shall be distributed equally, between Shri Bharatkumar Upendrabhai Patel, grandson of the testator, and another grandson who may be born. The said clause further provides that on the birth of the second grandson both the grandsons shall share equally. The will further provides that if at the time of the death of the testator both his grandsons were minor, in that case, the testator appointed Shri Upendrabhai Maganbhai Patel (son of the testator) as executor and he will manage the entire estate as guardian of both the grandsons. The will further states that on attaining majority, Shri Upendrabhai Maganbhai Patel shall hand over the properties equally between the two grandsons. The said will further provides that, on his death (testator), some of the properties mentioned in the will shall be handed over to the HUF of his son Shri Upendrabhai Maganbhai Patel, along with other members of the family : his wife, sons and daughters. Clause 7 of the will provides that the distribution of the properties shall take place immediately on the death of the testator. In para 8, the will further provides that if the estate duty and other Government dues, taxes, etc., were payable on his death (testator), the same shall be paid or borne by the HUF of Shri Upendrabhai Maganbhai Patel, out of the share allocated to the said HUF. Para 11 of the will provides that on his death (testator), Shri Upendrabhai Maganbhai Patel (son of the testator), shall immediately take charge of all his properties and he shall distribute the same between various beneficiaries as provided in clause 6 of the will. In respect of the assessment years 1973-74 to 1977-78, Shri Nimish U. Patel, minor grandson of the testator, filed wealth-tax returns disclosing net wealth of Rs. 5,60,000, Rs. 5,02,122, Rs. 6,54,746, Rs. 8,52,752 and Rs. 1,02,305, respectively. The WTO found that Shri Nimish U. Patel was a beneficiary in three private trusts. The corpus of these trusts is made of investments in shares of limited companies and deposits with companies and others. During the course of assessment proceedings, on behalf of the assessee it was contended that the process of taking possession of the assets of the deceased, i.e., obtaining the probate and also meeting the liabilities of estate duty, had to be completed before the assets in question are divided among the legatees, as per the terms and conditions of the will. The ITO did not accept the said contentions of the assessee. According to him, the executor was bound to act in conformity with the terms and conditions laid down in the will. The WTO was of the view that according to para 3 of the will the distribution of the assets shall take place immediately after the death of the deceased and shall be made according to the terms and conditions contained in the will. So the WTO has taken the value of the shares of the assessee in the property in question at Rs. 2,41,543. Consequently, the WTO completed the assessments.
(3.) THE assessee took up the matter in appeal. On behalf of the appellant, it was submitted that the WTO was not justified in including the legatee's share as the estate is still managed by the executor. It was also contended that the income of the estate of the deceased shall be assessed separately, as per the provisions of Section 168 of the Income-tax Act, 1961 ('the Act') till the income and wealth of the estates are distributed to, or applied to, the benefit of any specific legatee. Thus, he contended that the estate of the deceased for the years under consideration should be assessed under Section 168, as a separate taxable entity, and the assessee's share in that property should not be included in his net wealth during the years under consideration.;

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