COMMISSIONER OF INCOME TAX Vs. A SAVUDAPPAN

JUDGEMENT

(1.) IT is a combined reference both under the Income-tax Act, 1961 and under the Wealth-tax Act, 1957. Insofar as the assessment under the Income-tax Act is concerned, the assessment years involved are 1978-79 to 1981-82 and under the Wealth-tax Act, the assessment years involved are 1978-79 and 1977-78. The facts are common and, hence, all the tax cases are dealt with together

(2.) ONE A. Savadappa Gounder, Dindigul died on 6-2-1967 leaving behind him a registered will in which his cousin brother Savadappan was appointed as an executor to supervise the estate. The legatees under the will are his wife and minor children. The executor under the will was empowered to manage the affairs of the estate consisting of movable and immovable properties described in Schedules 'A' to 'C' to the will. 'A' Schedule consisted of immovable properties as well as certain amounts standing in the capital and current accounts of the firm. 'A' Schedule was left to the wife of late Savadappa Gounder and his two minor children S. Ganesan and S. Savudeswari. 'B' Schedule was left to other relatives of the deceased. The executor Savadappan was empowered to continue the partnership business, to operate the business accounts in Lakshmi Vilas Bank, to invest in business and to improve the wealth of the estate with a condition that he should hand over the estate after the minor children attained majority. The minor children were admitted to the benefits of the partnership and the capital contribution for admission to the benefits of the partnership was made by withdrawing the accounts of the deceased in the firm

(3.) MR. C. V. Rajan, the learned counsel for the revenue, submitted that the executor continued to be the executor and it is not correct to say that the executor shed his character as an executor and assumed the character of trustee when he received the share income on behalf of the minors, and the mere fact that the executor had contributed the capital with a view to implement the directions of the testator would not show that the share income was not a part of the income of the estate. According to the learned counsel for the revenue, under the terms of the will, the minors have no interest in the properties of the estate during their minority and the executor invested money in the name of minors and they were admitted to the benefits of the partnership because of the capital contribution and admittedly, the capital contribution came from the estate of the deceased and, therefore, the assessment of the share income in the hands of the executor along with other income of the estate was proper. The learned counsel for the revenue also submitted that section 168(4) has no application on the facts of the case as the said section deals with the income of the estate distributed or applied for the benefit of any specific legattee and in the instant case, the capital contributed cannot be regarded as income of the estate distributed to a specific legattee so as to attract the provisions of section 168(4). He further submitted that it is not a case falling within the scope of section 64 of the Income-tax Act, but it is a case under section 168(1)