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Facts
The assessee is the estate of a deceased individual, represented by multiple executors. The CPC taxed the estate as an Association of Persons (AOP) at the maximum marginal rate, while the assessee contended it should be taxed as an individual at slab rates, citing Section 168 of the Income Tax Act.
Held
The Tribunal held that the estate of a deceased individual, even with multiple executors, should be assessed as an individual and taxed at the applicable slab rates. The application of the maximum marginal rate and surcharge by the CPC was found to be incorrect.
Key Issues
Whether the estate of a deceased individual, represented by multiple executors, should be taxed as an AOP at the maximum marginal rate or as an individual at slab rates?
Sections Cited
154, 143(1)(a), 168, 159, 164
AI-generated summary — verify with the full judgment below
PER PAWAN SINGH, JUDICIAL MEMBER:
These three appeals by assessee are directed against the separate orders of ld. CIT(A) for A.Y. 2021-22, 2022-23 & 2023-24. In all three appeals, the assessee has raised certain common grounds of appeal, facts in both the years are almost similar except variation of addition / adjustment made by CPC and confirmed by ld. CIT(A). Thus, all the appeals were clubbed, heard together and are decided by common order to avoid the conflicting decision.
For appreciation of facts, facts in appeal for A.Y. 2021-22 in are treated as lead case. The assessee has raised following grounds of appeal:
1. On the facts and in the circumstances of the case and in law the Commissioner of Income Tax (Appeals), grossly erred in rejecting the appeal against the order u/s 154 of the Income Tax Act 1961.
& 1417/Mum/2025 Estate of Satibai Tahilram Chellaram 2. The CIT Appeals erred in not accepting the plea the charging of higher rate of tax by the CPC was beyond his power under section 143(1)(a) and he ought to have directed the CPC to charge proper tax in the intimation passed u/s 143(1)(a) of the Income Tax Act as applicable to an AOP of individuals as against the tax applicable to an AOP in general.
3. On the facts and in the circumstances of the case and in law the CIT Appeals grossly erred in holding that the appellant was liable to be taxed as an AOP at the maximum marginal rate mainly on the ground that the appellant had not furnished a copy of any trust deed totally being blindfolded to the fact that the appellant is not a trust, but an Estate of a deceased Individual, and hence is liable to be taxed at the rates as the applicable to an individual even if there is more than one Trustee.
4. The appellant submits that the Trustees as per the Probated Will are deceased and the Probate is granted to the son of one of the deceased Trustee who is an individual administering the Estate of the deceased.
On the fact said in the circumstances of the case and in law, the CIT Appeals has erred in coming to a conclusion that if there is more than one trustee the AOP is liable to be taxed at the maximum marginal rate inspite of the fact that the beneficiaries are all individuals and as per the provision of S. 159 r.w.s. S. 164 of the Income Tax Act 1961 the estate is to be assessed at the rate as applicable to each beneficiary in its individual capacity.
6. On the facts and on the circumstances of the case and in law the CIT Appeals erred is not upholding the ground up appeal that the CPC has acted beyond its powers under section 143(1)(a) of the Income Tax Act in applying the maximum marginal rate of tax which power is not granted while passing an intimation u/s 143(1)(a) of the Income Tax Act.
On the facts and in the circumstances of the case and in law, the CIT Appeals erred in rejecting the appeal of the appellant not appreciating the fact the provisions of S. 143(1)(a) do not permit an adjustment in applying the rate of and the same are restricted to those specified in the clause (i) to (vi) and hence the CPC ought not to have rejected the request for rectification.
On the facts and in the circumstances of the case and in law, the Commissioner of Income Tax Appeals erred in not deciding the appeal on the ground that the Assessing Officer did not have power u/s 143(1)(a) of the Income Tax Act 1961 to make any adjustment or charge tax at a higher rate than what had been declared as applicable to the appellant AOP thereby not treating the AOP being an estate of a deceased as an individual.
Without Prejudice: On the facts and in the circumstances of the case in law, the CIT Appeals ought to have held that the CPC erred in treating the appellant as an AOP liable to maximum marginal tax disregarding the fact that the status of the AOP is allotted by the Income-tax department to an Estate of an individual though the beneficiaries are individuals.
& 1417/Mum/2025 Estate of Satibai Tahilram Chellaram 10. The appellant submits that the CPC has exceeded his powers under u/s 143(1)(a) and hence the rectification application ought have been allowed failing which the CIT Appeals ought to have directed the CPC to charge tax as applicable to an Individual.
11.The appellant craves leave to add to, alter or vary the grounds of appeal at or before the hearing of the appeal.”
Rival submissions of both the parties have been heard and record perused.
The learned Authorised Representative (ld. AR) of the assessee submits that assessee died on 01/02/1989 during her life time executed a Will. The said Will is probated by the order of Bombay High Court vide Petition No. 970 of 2007 in order dated 06.02.2009. Copy of Will and probate order is filed on record. Under the Will, the assessee appointed his three sons as executors / administrator i.e. Murli, Pishu and Ram. In the Will, the assessee also made her married daughters as beneficiary of income earned from the estate left by her till the distribution of asset/ estate. The ld. AR of the assessee submits that as per the provisions of section 168, executors are liable to pay income tax on the income arising out of estate of deceased person in their individual capacity. Further, provisions of section 168(1) specifically prescribed that status of the executor shall be individual in case, if there is only one executor.
If there is more than one executor of the Will then the status of executor shall be considered as association of person (AOP). As there are three executors in the Will, the assessee is considered as AOP in the income tax return, however, computed income tax on the income of estate of deceased at the slab rate applicable. Though, the assessee is AOP but is to be taxed as an individual as the tax is to be levied on the income from estate of individual deceased assessee. The CPC while processing the return of income treated taxing at slab rate rates. The assessee filed application for rectification under section 154 vide application dated 24.12.2022. The CPC instead of rectifying the mistake also levied surcharge of Rs. 3,03,077/-. No surcharge is leviable as income from estate of deceased-assessee is less than Rs. 50,00,000/-.
Before ld. CIT(A), the assessee relied on the decision of Madhya Pradesh High Court in CIT Vs G.B.J. Seth & Anr. 133 ITR 192 (MP). The ld. CIT(A) failed to appreciate the ratio of said decision and held that assessee failed to provide information asked in his notice dated 21.08.2024. The details of executor are mentioned in the Will itself. The ld. AR of the assessee submits that his case is squarely covered by the decision of Tribunal in Estate of Late of Nalini Atul Bhagwati Vs ADIT in dated 16.01.2025 and in Estate of Late Harkishin Bhojraj Chanrai Vs DCIT in dated 29.06.2022.
On the other hand, the ld Senior Departmental representative (Sr DR) for the revenue supported the orders of lower authorities.
I have considered the submission of both the parties and perused the record carefully. I find that there is no dispute about the facts that in the Will the executor and beneficiary is determined and known. Though, there is more than one executor of the Will, however, the estate belongs to an individual deceased. Income from estate of deceased is to be assessed till the distribution of estate of deceased. Therefore, the tax rate applicable on the income of estate of deceased cannot change the status from individual to AOP. The view taken by ld. CIT(A) that if more than one executor, the estate Madhya Pradesh High Court in CIT Vs GBJ Seth & other (1982) 133 ITR 192 (MP) held that though the assessment is on the executor or executors, for all practical purpose, it is the assessment of the diseased. It was also held that status of AOP is for statistical purpose and that notwithstanding the status of the assessee being an AOP. Thus, the order of ld. CIT(A) is set aside and AO is directed to consider the estate of Satibai Tahilram Chellaram as ‘individual’ and be tax as per slab rate applicable. Similar view was taken by division bench of Mumbai Tribunal in Estate of late Nalini Atul Bhagwati Vs ADIT (supra). I further find that in order passed under section 154, the CPC added surcharge which is not applicable in the present case, hence such surcharge is delated. In the result, a ground of appeal
of the assessee for AY 2021-22 is allowed. AY 2022-23 & (AY : 2023-24)
5. As recorded above, in these years of appeal, the assessee has raised similar grounds of appeal as raised in appeal for A.Y. 2021-22 which I have allowed, therefore, these two appeals are also allowed with similar direction. In the result, the appeal for AY 2022-23 & 2-23-24 is also allowed.
In the result, all the appeals of the assessee are allowed.