- This is a reference under section 66(1) of the Indian Income-tax Act by the Appellate Tribunal, Bombay. The reference is at the instance of the assessee and relates to the assessment year 1955-56, the previous year being the financial year ending on March 31, 1955. The questions referred to us are :

"1. Whether, on the facts and in the circumstances of the case, the receiver was liable to be assessed under section 41(1) of the Act ?

2. If the answer to question No. 1 is in the affirmative, whether the assessment could be on the three executors as an association of persons or on the four persons consisting of the three executors and Shri Shukla ?

3. Whether, on the facts and in the circumstances of the case, the receiver was liable to be assessed under section 3 read with section 10 of the Act in respect of the business at the rate applicable to the total income of the business or whether the beneficiaries should have been assessed directly under section 41(2) ?"

The facts are that one Shri Warde was the owner of Ghorawari Kalan Collieries and of other mines and collieries situated in some districts of the State of Madhya Pradesh. He died on February 2, 1953. The deceased executed a will on January 18, 1953. He left behind him at the time of his death one brother and three sisters. By clause (2) of the will he appointed Shri Tribhuvandas Shukla, Seth Natwarlal Shamaldas Worah and Shri Ratilal as executors of the will. By the will the deceased bequeathed all his rights, property and interest in all mines including the Ghorawari Kalan Colliery to Shri Tribhuvandas Shukla with the direction that half of the amount of the total net profits accruing from the mines and collieries shall be deposited by Shri Tribhuvandas Shukla in the bank and the amount so deposited shall be shared by his brother and sisters during their lifetime in the proportion stated in clause (6) of the will. The will also provided that in case any of the sisters and brother desire to manage or run a mine independently he or she could run and manage any one of the mines or collieries specified in clause (9) of the will, and that in that event the relation or relations managing and running the mine shall account for all the profits to Shri Tribhuvandas Shukla and pay him half the amount of the net profits accruing from the mine or colliery so managed, the remaining half being shared by the three sisters and brother in the said proportion. The management, possession and control of other mines was given exclusively to Shri Tribhuvandas Shukla. The deceased gave his books, furniture, guns etc., and other moveable property and cash in the house to his three sisters and brother in the proportion stated in clause (6). He directed the executors to pay out of his property all just debts, testamentary and funeral expenses. As Ratilal Shukla refused to work as an executor the probate of the will was granted by the District Judge of Chhindwara to Shri Tribhuvandas Shukla and Shri Natwarlal Worah on December 21, 1955.

On receiving the report of the death on Shri Warde, the District Judge, Chhindwara, made an order on February 5, 1955 under section 54(2) of the Administrator-Generals Act, 1913, read with section 269 of the Succession Act, 1925, appointing Shri Shirpurkar, advocate of Chhindwara, to take and keep possession and manage the property of the deceased. An application for the grant of probate was made on February 21, 1953, and as already stated the probate was granted on December 21, 1955.

The Income-tax Officer initiated proceedings for assessment of the income of the estate of Shri Warde after giving a notice to Shri Shirpurkar, the officer appointed by the District Judge, under section 269 of the Succession Act. The legatee, Shri Tribhuvandas Shukla, raised the objection that the Income-tax Officer should not proceed to assess the estate as the matter of grant of probate was pending before the District Judge. The objection was overruled and the Income-tax Officer assessed the income of the estate of the deceased, Shri Warde, through Shri Shirpurkar. When the matter came up before the Appellate Assistant Commissioner on an appeal preferred by Shri Tribhuvandas Shukla as executor, it was contended that as Shri Shirpurkar had been appointed as a receiver for the possession and management of the estate of Shri Warde by an order of the court, the tax should have been levied upon and recovered from the receiver in the like manner and to the same amount as it would have been leviable upon and recoverable from the persons on whose behalf the income, profits or gains from the estate of the deceased were receivable : and that as the shares of Shri Tribhuvandas Shukla and of the brother and sisters of the deceased in the income, profits and gains were definite, specific and known, the tax should have been calculated as provided in section 41(1) of the Act. The Appellate Assistant Commissioner rejected this contention observing that no probate had been granted when the assessment was made; that Shri Shirpurkar, the receiver, came within the charging section as he realised the income as owner even if he might have held it for the benefit of other; that under section 10 of the Act it was the "person" carrying on the business who was assessable; that the "person" in the present case was the receiver of the estate of Shri Warde and that section 41(1) was only an enabling provision. He thus upheld the assessment made by the Income-tax Officer on the total income from business.

The contention about the applicability of section 41(1) was repeated before the Appellate Tribunal. Relying on Commissioner of Income-tax v. Balwantrai Jethalal Vaidya it was contended on behalf of the assessee that as a receiver had been appointed for the estate of the deceased, it was obligatory for the department to apply section 41(1). The department urged that section 41(1) had no applicability until the executors had fully administered and cleared the cleared the estate of the deceased; that as the receiver conducted the business he was the only person who could be assessed; and that the department had an option of proceeding against the receiver under sections 9, 10 and 12 of the Act without resorting to section 41. The department relied on Raghavalu Naidu & Sons v. Commissioner of Income-tax, Asit Kumar Ghose v. Commissioner of Agricultural Income-tax and Saifuding Alimohamed v. Commissioner of Income-tax. The Tribunal took the view that the position of Shirpurkar, the officer appointed under section 269 of the Succession Act, was not exactly that of a receiver; that under the will the executors were entitled to take charge of the estate immediately after the death of Shri Warde but they could not do so till the grant of probate; that the appointment of Shri Shirpurkar under section 54(2) of the Administrator-Generals Act read with section 269 of the Succession Act was only for protecting the estate during the pendency of, probate proceedings; that he had to deliver the estate to the holder of the probate; and that consequently even if section 41 applied, the assessment could only be on the executors an an association of persons and the tax could be so levied and recovered. The Tribunal also expressed the opinion that under the will all interest of the deceased in the mines passed solely to Shri Tribhuvandas Shukla; that the payment by him of half the amount of net profits to the sisters and brother of the deceased was only a diversion of the profits; and that, therefore, it was Shri Tribhuvandas Shukla who was carrying on the business; and, further, even if it be taken that business was carried on by four persons including Shri Shukla, it was a business carried on by an association of persons and it was this association that could be assessed. The Tribunal accordingly upheld the order of assessment made by the Income-tax Officer.

The material provision in this case is section 41(1) of the Income-tax Act which says that where income is receivable on behalf of any person by the Court of Wards, the Administrator-General, the official trustee or any receiver or manager (including any person what-ever his designation who in fact manages property on behalf of another) appointed by or under any order of a court or any trustee, the tax shall be levied upon and recoverable from the Court of Wards or receiver or manager or the persons enumerated in the provision in the like manner and to the same amount as the tax would be leviable upon and recoverable from the person on whose behalf the income, profits or gains are receivable. On this provision the main question that arises for consideration is whether Shri Shirpurkar, who had been appointed by the District Judge of Chhindwara as an officer under section 269 of the Succession Act for the management of the estate of the deceased, was a receiver or manager within the meaning of section 41 of the Act, and the income which came into his hands during the material year was the income of the legatees or beneficiaries under the will. It is only if he is so regarded that the question whether there is an obligation on the department to assess under section 41(1) the income he received as an income of each of the beneficiaries at the appropriate rate of tax can arise. It is, therefore, necessary to consider first the status of Shri Shirpurkar in the year in question before proceeding to consider the general question whether when an assessment is made on the Court of Wards, trustee, receiver or manager appointed by or under any order of a court in respect of income received on behalf of any person the Revenue has an option to proceed either under section 41 or under sections 8 to 13.

Shri Thakkar, learned counsel appearing on behalf of the assessee, argued that so far as the collieries and mines and the income thereof were concerned there was no question of any administration of the estate of the deceased; that under section 104 of the Succession Act the beneficiaries became entitled to this income right from the date of the death of Shri Warde; that Shri Shirpurkar, when he was appointed as a receiver by an order of the District Judge, became a receiver within the meaning of section 41 of the Income-tax Act; that he managed the estate on behalf of the beneficiaries and the income he received was the income receivable by the beneficiaries; and that consequently under section 41(1) income-tax could be levied not on the aggregate income of the estate in the hands of the receiver and at a rate appropriate to such total income but only on the income of each of the beneficiaries at the appropriate rate of tax. On the authority of Commissioner of Income-tax v. Balwantrai Jethalal Vaidya it was said that the provisions of section 41 were mandatory and if Shri Shirpurkar was a person who managed the estate on behalf of the beneficiaries and received the income thereof on their behalf, the department could not tax the receiver under section 9, 10 and 12 of the Income-tax Act without regard to the provisions of section 41.

In reply, the argument of Shri Adhikari, learned counsel appearing for the department, was that if Shri Shirpurkar had not been appointed for taking possession of the estate under section 269 of the Succession Act, section 24(2) of the Income-tax Act would have become directly applicable and the executors would have been assessed in respect of the total income of the deceased, Shri Warde, as if they were his legal representatives; that as an officer appointed under section 269 of the Succession Act Shri Shirpurkar managed the estate not on behalf of any beneficiary but on behalf of the execution; that consequently even on the application of section 41(1) the tax leviable upon and recoverable from him would be in the like manner and to the same amount as it would be leviable upon and recoverable from the executors under section 24B; and that, therefore, the assessment made by the Income-tax Officer on the aggregate income of the estate in the hands of Shirpurkar under section 9,10 and 12 was correct.

In our opinion, this argument put forward on behalf of the department must be accepted. Section 211 of the Succession Act, which deals with the vesting of the property of the deceased in the executors, section 269 of that Act and section 54(2) of the Administrator-Generals Act, 1913, under which Shri Shirpurkars appointment was made leave no doubt as regards his status during the material period. Under section 211 the executor of a deceased is his legal representative for all purposes and all the property of the deceased person vests in him as such. The property vests in the executor by virtue of the will and not of the probate; it is the will which gives the property to the executor. The grant of probate is only the method by which the will is established and the estate vests even before the grant of the probate (see Jehangir Rustomji v. Bai kukibai). section 269 of the Succession Act authorises the District Judge to appoint an officer to take and keep possession of the property until probate is granted of the will of the deceased person. The officer so appointed does not become a legal representative of the deceased and his estate does not become a legal representative of the deceased and his estate does not vest in him as such. The estate of the deceased remains vested in the executor and the officer appointed under section 269 of the Succession Act only manages and takes possession of the property on behalf of the executor. This is made further clear by section 54(2) of the Administrator-Generals Act, 1913, under which Shri Shirpurkars appointment was made. That provision says that in the circumstances stated in sub-section (1) the District Judge shall retain the assets of the deceased under his charge or appoint an officer under section 269 of the Succession Act

"to take and keep possession of the same until the Administrator-General has obtained letters of administration, or until some other person has obtained probate..., when the assets shall be delivered over to the holder of such probate, letters of administration or certificate"

. The provision that on the grant of probate the officer appointed under section 54(2) of the Administrator-Generals Act read with section 269 of the Succession Act shall deliver the assets of the deceased to the holder of such probate plainly shows that the appointment of the, officer for the management of the estate of the deceased is not on behalf of the beneficiaries but on behalf of the executors of the will. That being so, the income, profits or gains which such an officer receives from the estate of the deceased is one received not on behalf of any beneficiary but on behalf of the executor in whom the estate lies vested at the time. The position, therefore, of Mr. Shirpurkar till the grant of the probate on December 21,1955, was that he was a person appointed by an order of a court for managing the property of the deceased on behalf of the executors and the income he received from the estate of the deceased was not on behalf of the beneficiaries but on behalf of the executors.

section 104 of the Succession Act on which the assessee relies for the contention that as the beneficiaries acquired title to the legacies from the day of the death of the testator, therefore, Shri Shirpurkars appointment for the management of the estate of the deceased was on behalf of the beneficiaries, is of no help there. There is no doubt that in the case of a specific bequest the beneficiary acquires title by relation back when the executor gives his assent and the doctrine of relation back is not applicable to the bequest of a residue as the residue comes into existence when the administration is complete. The vesting of the estate referred to in section 104 does not become full or absolute until the assent of the executor is given. Till then, the legatee has only a inchoate right to the legacy. But here noting turns on the question as to when the legatee became entitled to his legacy and took a legal right to his legacy. For the purpose of assessment in respect of a particular period and on the events that happened in that period the question is whether the income Shri Shirpurkar got from the estate of the deceased was during that period receivable by the beneficiaries and was received by him on their behalf or whether it was one receivable by the executors and received on their behalf. The management of Shri Shirpurkar, as stated earlier, was clearly on behalf of the executors. Now, it is well settled that an executor does not while administration of the estate is still incomplete hold the estate or receive its income on behalf of any one else but does so on behalf of himself as the person in whom the estate lies vested at the time. An executor is not a trustee of the beneficiaries till the estate is fully administered. It is only after the estate is fully administered and cleared and the executor has ceased to be an executor that he becomes a trustee for certain purposes (see Asit Kumar Ghose v. Commissioner of Agricultural Income-tax). The legatees title is completed when the executor gives his assent. When assented it no doubt relates back to the date of the death of the testator. But in the meantime the assets of the deceased and the income thereof are payable to and receivable by the executor who has a legal title to them until the completion of the administration of the estate. That being the position, it is manifest that though the income received by Shri Shirpurkar would on the doctrine of relation back ultimately belong to the nneficiaries, the income he received during that period and was not received by him on their behalf. During that period Shri Shirpurkar received the income of the estate of the deceased which was receivable by the executors.

section 41(1) of the Income-tax Act would, therefore, apply to the case. But the levy and recovery of tax from the officer appointed to manage the estate of the deceased would be in the like manner and to the same amount as it would be leviable upon and recoverable from the executors on whose behalf the officer Shri Shripurkar received the income. In other words, the assessment would be on the executors as an association of persons under section 24B of the Act. On the language of section 41(1) if income is receivable on behalf of any person by the Court of Wards, the Administrator-General, the official trustee or any receiver or manager appointed by or under any order of a court, or any trustee, the department has no option but to make the assessment and levy tax upon the Court of Wards or the persons enumerated in section 41(1) in the like manner and to the same amount as the tax would be leviable upon and recoverable from the person on whose behalf the income, profits or gains are receivable.

Therefore, even on the application of section 41(1) the assessment made on Shri Shirpurkar on the aggregate income of the estate in his hands and at a rate appropriate to the total income was correct.

In this view of the matter, it is unnecessary to consider the question whether the interest of the deceased in the mines passed solely to Shri Tribhuvandas Shukla and the direction for payment by him of half the amount of net profits to the sisters and brother of the deceased was only one for diversion of the profits.

We would, therefore, answer the three questions referred to us by saying that Shri Shirpurkar was liable to be assessed under section 41(1) of the Act and the assessment would be in the like manner and to the same amount as on executors under section 24B of the Act. The department shall have costs of this reference. Counsels fee is fixed at Rs. 200.

Reference answered accordingly.