P.VENUGOPAL, J. - (1.) THE assessee is an HUF of which S. Prakasam is the Karta. Swaminatha Mudaliar, the father of Prakasam, was a partner in a number of concerns. He became divided from his son long ago. He executed a will on 20th Jan., 1969, under which he bequeathed all his properties that were then owned and possessed by him to his son, Prakasam, and his children then existing and also the children that might be born to him thereafter and the properties were to be owned and enjoyed by them as joint family properties with all the rights incidental thereto. Prakasam was appointed as executor under the will. He had then three minor sons. The assessee, which is the HUF, filed the return through its Karta, Prakasam, disclosing a net wealth of Rs. 3,37,830 for the asst. yr. 1971- 72, the relevant valuation date being 13th April, 1971. Prakasam filed another return in his capacity as executor of the estate of his deceased father disclosing a net wealth of Rs. 3,64,325 for the assessment year in question. The WTO came to the conclusion that on the death of Swaminatha Mudaliar his estate devolved upon the HUF under the will and he made a single assessment on the HUF without making any separate assessment on the executor. Before the AAC it was contended that the administration of the estate of Swaminatha Mudaliar had not been completed and the wealth of the estate of Swaminatha Mudaliar should be assessed separately in the hands of the executor. The AAC rejected the contention and confirmed the assessment made by the WTO. On further appeal to the Tribunal, it was held that the administration of the estate of the deceased, Swaminatha Mudaliar, had not been concluded since the estate duty assessment was not made on the relevant valuation date, and in view of the specific provision contained in s. 19A of the WT Act, the value of the estate of the deceased could not be included in the assessment of the HUF. Arising out of the order of the Tribunal, the following question has been referred to this Court for opinion under s. 27(1) of the WT Act: "Whether, on the facts and in the circumstances of the case, it could be said that the administration of the estate of the deceased, Shri Swaminatha Mudaliar, had not been completed on the relevant valuation date and hence the value of such estate had to be assessed separately in the hands of the executor under s. 19A of the WT Act, 1957, for the asst. yr. 1971-72 ?"
(2.) THE learned counsel for the Revenue contended that the Tribunal's finding that the administration of the estate by the executor cannot be taken to have been completed during the assessment year in question since the estate duty assessment has not been made and some of the executorial functions are yet to be performed by the executor, is erroneous, and even before the administration of the estate was completed, the executor can vest the properties in the legatees with mutual consent and if, after such assent, the executor continued in possession of the property bequeathed, he would cease to be an executor and become a trustee for the legatees concerned, and this question whether there was such an assent by the executor either expressly or impliedly has not been adverted to or considered by the Tribunal. In IRC vs. Aubrey Smith (1930) 1 KB 713 : 15 Tax Cases 661 (CA), the testator directed a sale of his properties, after payment of certain legacies and the distribution of the residue amongst his children in equal shares. The estate left by the deceased was subject to certain mortgages of considerable amount. The executors had been making payments to the children of the testator from out of the amounts with them, after crediting the share of the income relating to the residuary estate in their favour and debiting the payments made. It was contended that as the mortgages had not been paid off, there was no ascertainment of the residue, and as such the property could not be deemed to have been vested before the residue was ascertained. The contention was negatived holding that the existence of a debt or debts or liabilities which are outstanding do not bar the assent of the executor being inferred by his conduct, and on such an assent, the executors shed their character and become trustees for those who are beneficially interested.
(3.) IN CIT vs. Estate of Late Sri T. P. Ramaswami Pillai (1962) 46 ITR 666 (Mad) : TC 44R.906, the Revenue took the stand that as the debts have not been fully discharged, the assessee would be assessed only as executors and not as trustees under s. 41 of the Indian IT Act, 1922. It was pointed out that it was open to the executor to vest the properties in the legatees with mutual consent and hold the legacies as a trustee even before all the debts are discharged. In that case, the Court held that the legacy had been ascertained and the executors had assented to vest the properties in the legatees.;