NAVNIT LAL SAKAR LAL vs. COMMISSIONER OF INCOME TAX

CIVIL APPEAL No. 1152/1978Supreme Court1991 INSC 27629 October 1991Bench: 3 JudgesAuthor: S. RANGANATHAN, N.D. OJHA, V. RAMASWAMI VNIT LAL SAKAR LAL14 pages
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What were the facts?

The assessee and his brother were bequeathed properties by their grandfather's will in 1956. The testator died in 1957, and as no executor was named, his son, 'S', acted as the legal representative, filing tax returns for the estate until assessment year 1967-68. The Income Tax Officer assessed the assessee on half the estate's income for assessment years 1963-64 to 1967-68, believing the estate vested in the grandsons immediately upon death. The Appellate Assistant Commissioner upheld this. However, the Income Tax Appellate Tribunal deleted the additions, finding the assessee not taxable. The Revenue referred the matter to the High Court, which ruled in favour of the Revenue. The assessee then appealed to the Supreme Court.

What did the Supreme Court hold?

The Supreme Court held that Section 168(3) of the Income Tax Act, 1961, clarifies that an executor is assessed until the estate is distributed. The Court found the High Court was wrong in deeming the administration complete. Considering the nature of the properties, including a share in a firm, the executor had specific steps to take before administration could be considered finished, such as dividing movable and immovable properties and arranging for the legatees to take over the deceased's firm share. The Court noted there was no evidence of deliberate delay by the executor in distribution or assessment proceedings, and a substantial part of the estate duty was paid promptly. The Court also emphasized that outstanding estate duty liability is a significant factor in determining the completion of administration and should not be ignored. The appeals were allowed, and the question was answered in favour of the assessee.

What were the issues?

1. Whether, under Section 168 of the Income Tax Act, 1961, income from the estate of a deceased person is chargeable to tax in the hands of the executor, and if so, whether 'S', the son of the deceased, qualified as an executor, meaning the income should be assessed in his hands and not the assessee's, considering the discharge of estate duty liability as a primary function of an executor. The assessee argued that 'S' was an executor and administration was incomplete until estate duty was settled. The Revenue contended that the will contained a direct bequest, no administration was needed, and properties vested immediately in the legatees. The delay in estate duty payment or property handover should not postpone vesting. 2. Whether the administration of the estate was complete, and the properties had vested in the legatees, thereby making the assessee liable for income tax on his share.

Which sections of the Income-tax Act were involved?

Section 168

AI-generated summary — verify with the full judgment below

NA VNIT LAL SAKAR LAL v COMMISSIONER OF INCOME TAX OCTOBER 29, 1991 [S. RANGANATHAN, V.RAMASWAMI AND N.D. OJHA, JJ.] Income Tax Act, 1961: A B Section 168-lncome from estate of deceased person-Properties be- queathed to two grandsons-No executor named in the will-Son of testator administering the estate-Part of estate duty liability outstanding-:v'esting of properties in the legatees-When takes place-Administration of es- C tate-Wlzether complete-Half of the income from estate assessed at the hands of assessee one of the two legatees-Assessments whether validly made.

The grandfather of the appellant assessee executed a will in 1956 bequeathing his properties to the assessee and his brother. The testator D 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 returns up to assessment year 1967-68. E 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 brot

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