K.R. PATEL (DEAD) THROUGH L.RS. versus COMMISSIONER OF INCOME TAX

Citation: [1999] SUPP. 2 S.C.R. 44 · Decided: 27-08-1999 · Supreme Court of India · Bench: D.P. WADHWA, M.B. SHAH · Disposal: Dismissed

Judgment (excerpt)

A 
K.R. PATEL (DEAD) THROUGH L.RS. 
v. 
COMMISSIONER OF INCOME TAX 
AUGUST 27, 1999 
B 
[D.P. WADHWA AND M.B. SHAH, JJ.] 
Income Tax Act, 1961-Sections 11(1), 160(1) (iv), 161(1), 168 and 
256(1)-Will-Executors and trustees appointed under Will-Whether income 
C from the estate should be assessed in their hands as excutors or trustees-
Administration of estate not completed during the relevant assessment period-
Held, there is no rule of law as to when executor sheds his character as an 
executor and wears the robes of a trustee-It all depends on the construction 
of the Will as to when the testator desired the trust to come into being-Will 
providing trust was to come into being only after completion of administration 
D of the estate-Held, under the facts, income from the estate should be assessed 
in their hands as executors-Indian Succession Act, 1925-Sections 2(c), 
2(/), 211(1), 302, 317 and 366. 
The Bombay Public Trusts Act, 1950-Sections 2(13), 17, 18, 19, 20, 
21, 29, 36 and 66-Public Trust created by Will-Will providing that all 
E properties not bequeathed specifically be converted into cash and used for 
charitable purposes in the absolute discretion of the trustees-Registration of 
Trust under the Act-Effect of-Held, trustees are not free to deal with the 
properties of the trust even if the Will empowers them to do so. 
Appellant, K and B, since dead, were appointed as executors and trustees 
F under a Will executed by J who died on January 8, 1962. It was provided in 
the Will that the executors and trustees should first pay all the debts, 
funeral, death and other testamentary expenses, estate duty, Government 
dues; that they should convey the two immovable properties bequeathed under 
the Will after obtaining probate of the Will and till then to deal with the 
G rents and income arising therefrom in the same manner as of other estate; 
and that they should convert all the properties both ·movable and immovable, 
including business, which had not been bequeathed specifically under the 
Will into cash and then donate the money so collected for charitable purposes 
in their absolute discretion. Probate of the Will was granted on April, 5, 
1963. Immovable properties mentioned in the Will were transferred and all 
H 
44 
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K.R. PATELv. C.I.T. 
45 
payments as devised by the Will were made to respective legatees by February, A 
1964. The trust was registered under Section 18 of the Bombay Public Trust 
Act, 1950 on December 29, 1964. 
The executors and trustees filed income-tax return for the assessment 
year 1964-1965 for the previous year (October 20, 1962 to October 17, 
1963). Return was signed by them as executors of the Will. It was contended B 
before the Income-tax Officer that the income assessable in their hands as 
trustees and not as executors, and its income was exempt from tax under 
Section 11(1) of the Income Tax Act, 1961. The Income-tax Officer assessed 
the income in their hands as executors. Appeal preferred by.the assessee 
before the Appellate Assistant Commissioner was dismissed on the ground 
that the administration of the estate had not been completed. Against the C 
order of the Appellate Assistant Commissioner, appeal filed by the assessee 
before the Appellate Tribunal was allowed on the ground that they had shed 
their character as executors and acquired that of trustees on April 5, 1963 
when probate was granted; and that even otherwise the income of immovable 
properties specifically bequeathed and of assets sufficient to pay off the D 
monetary legacies and the outstanding estate duty would be assessable in 
their hands in their capacity as executors while the income from remaining 
assets would be assessable in their hands as trustees. It held that the income 
ought to have been assessed in their hands as trustees. The Appellate 
Tribunal referred three questions at the instance of the revenue to the High 
Court under Section 256(1) of the Income Tax Act, 1961. High Court held E 
that K and B did not hold the properties as trustees at any point of time; that 
during the assessment year 1964-1965, Kand B did not receive any income 
as trustees and were not liable to be assessed as trustees; aQd that Section 
168 of the Act would apply for assessment of the income. Aggrieved by the 
findings of the High Court, assessee has filed the present appeal. 
p 
The appellant contended that the income was assessable in their hands 
as trustees under Section 160(1) (iv) read wit

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