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PETITIONER:

NAVNIT LAL SAKAR LAL

Vs.

RESPONDENT:

COMMISSIONER OF INCOME TAX

DATE OF JUDGMENT29/10/1991

BENCH:

RANGNATHAN, S.

BENCH:

RANGNATHAN, S.

RAMASWAMI, V. (J) II

OJHA, N.D. (J)

CITATION:

1992 AIR 466 1991 SCR Supl. (1) 585

1992 SCC (1) 185 JT 1991 (4) 186

1991 SCALE (2)893

ACT:

Income Tax Act, 1961:

Section 168 Income from estate of deceased

person--Properties bequeathed to two grandsons--No executor

named in the will--Son of testator administering the es-

tates--Part of estate duty liability outstanding--Vesting of

properties in the legatees---When takes place---Administra-

tion of estate---Whether complete Half of the income from

estate assessed at the hands of assessee one of the two

legatees--Assessments whether validity made.

HEADNOTE:

The grandfather of the appellant assessee executed a will

in 1956 bequeathing his properties to the assessee and his

brother. The testator 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 re-

turns up to assessment year 1967-68.

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 brother immediately on

the death of the testator, as per the terms of the will. The

Income Tax Officer included half of the income from proper-

ties left behind by the deceased in the total income of the

assessee in respect of assessment years 1963-64 to 1967-68,

rejecting the assessee's contention that the estate was in

the administration of the Executor and the income thereof

had rightly been assessed in the hands of the executor. On

appeal, the Appellate Assistant Commissioner confirmed the

view taken by the Income Tax Officer. However, the Income

Tax Appellate Tribunal took the view that the assessee was

not taxable in respect of any part of the estate of the

deceased, and deleted the additions made in the assessment

orders.

instance of the Revenue, reference was made to the

High the question of assessability of the half share of the

estate of the

586

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deceased at the hands of the assessee, and the High Court

answered the question in favour of Revenue. Aggrieved

against ,the High Court's orders the assessee preferred the

present appeals.

On behalf of the assessee, it was contended that where a

person dies, the income of the estate of the deceased person

is chargeable to tax in the hands of the executor, and since

'S' the son of the deceased was an 'executor' within the

meaning of Section 168 of the Income Tax Act, 1961 in re-

spect of the estate of the deceased, the income from the

properties left behind by the deceased was to be assessed in

the hands of the Executor only and not in the hands of the

appellant assessee, and that the discharge of the estate

duty liability of the estate of the deceased being one of

the primary functions of an executor the administration of

the estate cannot be said to be complete until the estate

duty liability was properly provided for.

On behalf of the Revenue, it was contended that the will

contained a direct and simple bequest in favour of the

assessee and his brother;, that there was nothing in the

estate to be administered and the properties vested in the

two legatees immediately. It was also contended that the

delay on the part of the executor in making payment of

estate duty and handling over the properties to the two

legatees cannot postpone the vesting of the estate in the

two beneficiaries.

JUDGMENT:

Allowing the appeals, this Court,

HELD :1.1 Section 168(3) of the Income Tax Act, 1961

makes it clear that the executor will continue to be as-

sessed until the estate is distributed among the benefici-

aries equally according to their several interests. This

provision does not enact anything different from the pre-

existing law on the subject. [596 B]

1.2 In view of the facts and circumstances of the

present ease, the High Court was wrong in coming to the

conclusion that the administration must be deemed to have

come to an end.

Raghavalu Naidu & Sons v.C.L T., [1950] 18 I.T. R. 787

(Mad.), referred to. [595 E]

2.1. Having regard to the nature of the properties left

by the deceased it is clear that the executor had certain

steps to take before he could wash his hands off the admin-

istration of the estate. The movable properties and the

immovable properties belonging to the deceased in his indi-

vidual capacity had to be divided into two equal shares and

handed over to the two beneficiaries. A perusal of the

assessment order also

587

indicates that the deceased had a half share in a firm. The

executor, continued to derive a half share from the firm.

There is no information on record as to how this share in

the firm held by the deceased was disposed of. It was part

of the duties of the executor to make arrangements regarding

the devolution of the share of the deceased in the firm by

having the two legatees taken in as partners in respect of a

one-fourth share each in the firm. in the absence of any

such steps, the asset in question cannot be deemed to have

vested in the beneficiaries. [595 E-H]

2.2. There is nothing on record to indicate that there

was any deliberate attempt on the part of the executor to

postpone the distribution of the estate. There is also

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nothing to indicate that the assessment proceedings were in

any way delayed by the executor or the other legal represen-

tatives. A substantial part of the estate duty had been

paid without delay and there is nothing to suggest that the

payment of the balance of the estate duty was delayed delib-

erately by the executor. [593 C-E]

Navnitlal Sakarlal v.C.W.T., (1977) 106 I.T.R. 512, ap-

proved.

Navnitlal Sakarlal v. 677; (1978) 125 I.T.R. 67, overruled.

3. Under the Estate Duty Act, the accountable person is

jointly and severally liable for the whole of the duty along

with other accountable persons. This does not necessarily

mean that the incidence of the duty will ultimately fall on

him always. But he has to consider ways and means of paying

the duty and, though he may or may not be able to pay off

the entire estate duty before distributing the estate, he

will be exposing himself to a great risk if he does not make

adequate arrangements for the due payment of the duty,

before distributing it. The High Court was wrong in taking

the view that the fact of a part of the estate duty liabili-

ty being outstanding should be ignored in deciding the issue

as to whether administration is complete. [594 D-G]

Leelavatamma v.C.E.D, (1991) 188 I.T.R. 803 (SC), relied on.

C.I.T. v. Bakshi Samparan Singh [1982] 133 ITR 650

(P&H); C.I.T. v. Ghosh, (1986) 159 ITR 124 (Cal.); Raghavalu

Naidu & Sons v. C.I.T. (1950) 18 ITR 787 (Mad.); referred

to.

XXX XXX XXX

588

RANGANATHAN, J. Balabhai Damodardas, aged 98 years,

executed will on October 6, 1956, so that, after his death,

his property might be administered as per this" desire". The

material provisions of the will were follows:

"2. I have the following properties of my

ownership:-

(a) My individual i.e. 'personal movable and

immovable property which is being assessed in

Income Tax as individual.

(b) Whatever right, title and interest I have

in movable and immovable properties of our

joint family.

There was no executor named in the will.

3. The above movable and immovable properties

I may enjoy, sell or exchange in future, but

if by God's will at the time when I am not

alive whatever is left of my individual per-

sonal property of my ownership including

additions or deletions therefrom after paying

my debts, income-tax, super-tax, estate duty,

municipal tax etc. and any other outstandings

as also medical expenses and expenses for

obsequial ceremonies and charity and also my

right, title and interest in our joint family

movable and immovable properties, in that way

all my property when I am not alive shall be

taken possession of by my two grandsons Nav-

nitlal Sakarlal and Nandkishore alias Shamub-

hai Sakarlal and they shall use and enjoy the

same as they desire."

There was no executor named in the will.

Balabhai Damodardas died on 31-12-57. Thereafter, his

son, SakarBalabhai, describing himself as the legal repre-

sentative of the deceased, furnished returns of income as

well as returns of wealth in respect of the' estate of the

deceased Balabhai Damodardas and he was assessed on the

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basis of those returns for the assessment years following

the death and up to assessment year 1967-68.

We are concerned in these appeals with the income tax

assessments of Navnitlal Sakarlal (herein referred to as the

'assessee'), one of the two grandsons of Balabhai Damodar-

das, to whom the latter had bequeathed his properties, for

the assessment years 1963-64 to 1967-68. The Income Tax

Officer took the view that the estate of Balabhai Damodardas

had

589

vested in the two grandsons immediately on his death as per

the terms of the will. He, therefore, proceeded to assess

the assessee and his brother separately in respect of one

half of the income from the properties let behind by Balab-

hai Damodardas. The contention of the assessee, that the

estate of the deceased was still under Administration and

continued to be so till August 5, 1970; and that the income

thereof had rightly been as sessed, in the earlier years as

well as in the year as well in the years presently under

consideration, in the hands of Sakarlal Balabhai as execu-

tor, was rejected. The Appellate Assistant Commissioner also

confirmed the view taken by the Income-Tax Officer, though,

for the assessment years 1966-67 and 1967-68 he made some

modifications in the assessments with which we are not here

concerned.

The Income Tax Appellate Tribunal had earlier taken the

view, in the wealth-tax assessments of the assessee and his

brother for the assessment years 1963-64 and 1964-65, that,

on the death of Balabhai Damodardas, the assessee and his

brother had become the owners of interests in the estate in

accordance with the will and were consequently assessable to

wealth-tax in respect of their respective shares in the

estate. This view had also been upheld by the Gujarat High

Court in its judgment reported at Navnitlal Sakarlal

v.C.W.T. [1977] 105 I.T.R.512. However, when the income-tax

appeals for the assessment years 1964-65 to 1967-68 came up

before the Tribunal, it took the view that the assessee was

not taxable in respect of any part of the income of the

estate of Balabhai Damodardas for these assessment years.

The additions made in the assessment orders in this respect

were deleted.

At the instance of the Revenue, the following question

was referred to the High Court of Gujarat for its opinion

under section 256(1) of the Income Tax Act.1961:

"Whether the Income Tax Appellate Tribunal was

right in law in holding that half share of the

income in respect of the estate of late Shri

Balabhai Damodardas was not taxable in the

hand of the assessee when the estate was being

administered by Shri Sakarlal Balabhai, having

regard to the provisions of Section 168 of the

Income Tax Act, 1961?"

This question has been answered by the High Court - its

decision had been reported as Navnitlal Sakarlal v CIT in

[1978] 125 I.T.R.67 - in the negative and in favour of the

Revenue. The present appeals have bee preferred by the

assessee from the High Court's judgment.

590

At the outset, two aspects which had been raised before

the High Court, may be cleared up. In the first place, the

contention of the assessee before the High Court was that

the decision in the wealth-tax case would not govern the

income tax assessments in view of the provisions contained

in Section 168 of the Income Tax Act, 1961, a provision

corresponding to which (viz. s.19A) has been introduced in

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the Wealth Tax Act only on 1.4.65. The High Court pointed

out - and it is common ground before us that "in view of the

distinction between the provisions of the Wealth Tax Act and

the Income Tax Act and in view of the fact that, for the

relevant years under consideration before the Division Bench

which considered the wealth-tax case, namely, assessment

years 1963-64 and 1964-65, section 19-A was not on the

statute book, the decision in the wealth-tax case will not

affect the decision in this case except in an indirect

manner". The second issue, on which a certain amount of

debate took place before the High Court, was as to whether

Sakarlal Balabhai could be treated as an 'executor' within

the meaning of section 159 of the Income Tax Act,1961,

considering that the will had not named any executor and

that Sakarlal Balabhai had taken charge of the estate and

began administering it voluntarily. On this point, the High

Court has held, after discussing the relevant provisions,

that Sakarlal Balabhai was a person who intermeddled with

the estate of the deceased and was, therefore, included in

the definition of 'legal representative' for the purposes of

the Income Tax Act. On this point also there is no dispute

before us.

The only questions arising for our consideration is

about the proper mode of assessment of the income from the

properties left by Balabhai Damodardas. The procedure to be

followed., when an assessee dies, is set out in section 168

of the Act. This section reads as follows:

168. (1) Subject as hereinafter provided, the

income of the estate of deceased person shall

be chargeable to tax in the hands of the

executor,

(a) If there is only one executor, then, as if

the executor were an individual; or

(b) If there are more executors than one,

then, as if the executors were an association

of persons;

and for the purposes of this Act, the executor

shall be deemed to be resident or non-resident

according as the deceased person was a resi-

dent or non-resident during the previous year

in which his death took place.

591

(2) The assessment of an executor under this

section shall be made separately from any

assessment that may be made on him in respect

of his own income.

(3) Separate assessments shah be made under

this section on the total income of each

completed previous year or part thereof as is

included in the period from the date of the

death to the date of complete distribution to

the beneficiaries of the estate according to

their several interests.

(4) In computing the total income of any

previous year under this section, any income

of the estate of that previous year distribut-

ed to, or applied to the benefit of, any

specific legatee of the estate during that

previous year shah be excluded; but the income

so excluded shall be included in the total

income of the previous year of such specific

legatee.

Explanation: In this section, "executor"

includes an administrator or other person

administering the estate of a deceased person.

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On behalf of the appellant, Sri Salve submits that, when

a person dies, the income of the estate of the deceased

person is chargeable to tax in the hands of the executor,

separate assessments being made on the total income of each

completed previous year or part thereof comprised in the

period from the 'date of the death to the date of complete

distribution to the beneficiaries of the estate according to

their several interests'. He points out that it is now

common ground that Sakarlal Balabhai was an 'executor'

w,thin the meaning of section 168 in respect of the estate

of the deceased. The Tribunal has also given a categorical

finding of fact in the following terms:

"Balabhai Damodardas died on December 31,

1957, leaving behind as his next-of-kin a son,

named Sakarlal Balabhai, three daughters and a

number of grand-children including the appel-

lant assessee and his brother. On the death of

Balabhai Damodardas, Shri Sakarlal Balabhai

took charge of the properties left behind by

the deceased and started administering them.

By an order made on December 30, 1961, an

amount of Rs.1,04,619 was determined as the

estate duty payable on the properties passing

on the death of Balabhai Damodardas. It is not

in dispute that upto the close of the assess-

ment year 64/65, part of the estate duly

592

was remaining unpaid and further upto the last

day of the accounting year for the assessment

year 67/68 which is the last assessment year

in appeal, the estate was not distributed or

applied for the benefit of the assessee and

his brother, the two legatees. As a matter of

fact nothing was distributed till 5th August,

1970".

He submits that, on the above finding of fact and the

dear terms of sec.168(3) & (4), the income of the properties

left by Balabhai Damodardas 'had to be assessed in the hands

of Sakarlal Balabhai, commencing from the date of death and

at least till the 5th of August, 1970.

We are of the opinion that the above contention urged

on behalf of the assessee is well founded. There is now no

dispute that Sakarlal Balabhai was the executor in respect

of the estate left by Balabhai Damodardas. There is also no

dispute that the income from the properties left by Balabhai

Damodardas was assessed in the hands of Sakarlal Balabhai

for the assessment years 1958-59 to 1962-63. Nothing has

happened since to change the above position. The Tribunal

has found that Sakarlal Baiabhai was administering the

estate as an executor and that the estate was not distribut-

ed till the 5th of August, 1970. It has also pointed out

that the estate duty payable in respect of the properties

passing on the death of Balabhai Damodardas had not been

paid till the close of the previous year relevant to the

assessment year 1964-65. Though the Tribunal has not set out

in detail the manner in which the estate was ultimately

distributed, it has given a categorical finding that, as a

matter of fact nothing was distributed till the 5th of

August, 1970, implying that there was a distribution on that

date. The Revenue has not challenged the correctness of this

finding of fact either generally or by raising a specific

question of law as to whether this finding was based on any

material. In the face of these findings by the Tribunal, it

is not possible to hold that the administration of the

estate was complete in any of the previous years with which

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we are concerned.

On behalf of the Revenue, Sri Manchanda vehemently contends

that the will contained a direct and simple bequest in

favour of the assessee and his brother. He submits that

there was nothing in the estate to be administered and that

the properties directly vested in the two legatees immedi-

ately in equal shares. According to his submission, the mere

fact that Sakarlal Balabhai purported to take charge of the

estate and administer it and was prolonging the so-called

administration by delaying the payment of estate duty and

the handing over the properties to the only two legatees,

593

cannot postpone the vesting of the estate in the two benefi-

ciaries. It is submitted that there was no complicated

process of administration called for in the present case. He

submits that the intervention of Sakarlal Balabhai was part

of a device to postpone a direct and immediate vesting of

the income and the properties in the hands of the legatees

in view of the high rates of tax applicable to their indi-

vidual assessments and to cordon off the income and the

estate into a separate assessment, purportedly on a socalled

executor. He submits that the Court should not encourage

attempts of this type to avoid the legitimate incidence of

taxation and that, in the circumstances, the answer given by

the High Court to the reference should be upheld.

There are a number of difficulties in accepting the

contention put forward by Sri Manchanda. In the first place,

the contention, its present form, has not been put forward

at any of the earlier stages. There is nothing in the state-

ment of facts or in the orders of the authorities to indi-

cate that there was any deliberate attempt on the part of

the executor to postpone the distribution of the estate. As

we have mentioned earlier, Balabhai Damodardas died on

31.12.57 and the assessment to estate duty of the estate

passing on his death was completed on December 30, 1961.

There is nothing to indicate that the assessment proceedings

were in any way delayed by the executor or the other legal

representatives. A substantial part of the estate duty had

been paid by October or November 1963. There is nothing to

suggest that the payment of the balance of the estate duty

was delayed deliberately by the executor.

Again, the submission that there was nothing in the

estate to be administered and this process was being delib-

erately prolonged by the executors and the legatees is not

based on the record. Though a reference has been made to the

estate duty liabilities being outstanding, there is nothing

to show that the only thing that remained to be done was the

payment of estate duty and that nothing else remained to be

done. There is no information on record before us as to the

various assets and liabilities of the estate shown by the

executor. No attempt has been made to find out whether there

were any other outstanding liabilities and when these were

discharged. We have mentioned earlier that the Tribunal has

found that something was done towards the distribution of

the estate in 1970 and it is not the suggestion of the

Department that this finding is based on no material. It is,

therefore, not possible to allow the counsel for the Revenue

to raise this contention at this stage.

Proceeding on the premise that only the estate duty

liability was outstanding, a contention appears to have been

put forward for the

594

Revenue that the discharge of the estate duty liability is

the personal liability of the residuary legatees and is no

part of the duties of the executor. This argument has been

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accepted by the High Court. On behalf of the assessee, it is

submitted that the discharge of the estate duty liability in

respect of the estate of the deceased is one of the primary

functions of an executor and that the administration of the

estate can not be said to be complete until the estate duty

liability is properly provided for, vide: C.I.T.v. Ghosh

(1986] 159 I.T.R. 124 (Cal). We are of opinion'that there is

forece in the appellant's contention. It seems that, under

the English Law, estate duty is regarded as part of the

"testamentary expenses" in respect of certain kinds of

property: [See Williams on Executors and Administrators,

14th Edn.Vol.1, pp.452-4]. The Estate Duty Act makes the

executor one of the accountable persons. Under S.55, he has

to deliver an account of the estate passing on the death. He

is accountable, under S.53, for the whole of the estate duty

on the property passing on the death though he will not be

liable for duty in excess of assets of the deceased which he

actually received or which, but for his own neglect or

default, he might have received. He is jointly and severally

liable for the whole of the duty along with other account-

able person. It is true that this does not necessarily mean

that the ultimate incidence of the duty will ultimately fall

on him always. But he has to consider ways and means of

paying the duty and, though he may or may not be able to pay

off the entire estate duty before distributing the estate,

he will be exposing himself to a great risk if he does not

make adequate arrangements for the due payment of the duty,

before distributing it. The proposition enunciated in the

cases referred to by the High Court that the estate duty is

a personal liability of the heirs and is not a debt or

encumbrance deductible in computing the principal value of

the estate - a proposition now settled by the decision of

this Court in Leelavatamma v.C.E.D. [1991] 188 I.T.R. 803

(S.C) or the fact that the estate duty is a charge on the

immovable properties passing on death do not detract from

the duties and responsibilities of the executor, as an

accountable person, to make satisfactory arrangements for

the payment of the estate duty. It is, therefore, difficult

to accept the view of the High Court that the fact of a part

of the estate duty liability being outstanding should be

ignored in deciding the issue as to whether administration

is complete.

The High Court has also expresed the view that the

administration of the estate should be deemed to be complete

as the estate could and ought to have been handed over by

the executor to the legatees. It has accepted this submis-

sion because, in its view, the executor had postponed the

actual distribution between the two residuary legatees

though all debts

595

had been discharged and the residue could have been easily

ascertained. Applying the test propounded by Viswanantha

Sastri,] in Raghavalu Naidu & Sons v.C.I.T. [1950] 18 I.T.R.

787 (Mad.) viz:

"[C]an it be said that the residuary estate

had taken concrete shape and could and should

have been handed over by the executors to the

persons beneficially entitled but for the fact

that the estate is Settled in trust and vested

in the executors as trustees?"

The High Court held:

"Under these circumstances, the only conclu-

sion that could be drawn is that by the com-

mencement of the period that is under consid-

eration, the residuary estate must be deemed

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to have been ascertained and the residuary

estate must be said to have taken concrete

shape and should have been handed over by

Sankarlal, the father of the assessee. Administra

tion had reached such a point that one can infer that the

administration had been completed and the residuary estate

had been ascertained or was capable or easily capable of

being ascertained".

We find it difficult to accept this conclusion. Even

leaving the estate duty out of account, it is difficult to

see how the High Court could have reached this conclusion.

Having regard to the nature of the properties left by Balab-

hai Damodardas, it is clear that the executor had certain

steps to take before he could wash his hands off the admin-

istration of the estate. The movable properties and the

immovable properties belonging to Damodardas in his individ-

ual capacity had to be divided into two equal shares and

handed over to the two beneficiaries. A perusal of the

assessment order also indicates that Balabhai Damodardas had

a half share in a firm known as Mangaldas Balabhai & Co. It

appears that Sankarlal Balabhai, as executor, continued to

derive a half share from the firm. There is no information

on record as to how this share in the firm held by Balabhai

Damodardas was disposed of. It was part of the duties of the

executor to make arrangements regarding the devolution of

the share of Balabhai Damodardas in the firm say, for exam-

ple, by having the two legatees taken in as partners in

respect of a one-fourth share each in the firm. In the

absence of any such steps, the asset in question cannot be

deemed to have vested in the beneficiaries. In fact, even in

what may be described as much clearer situations and where

the executor was also the sole beneficiary, it has been held

that the administration is not complete vide, C.I.T. v.

Bakshi

596

Sampuran Singh, [1982] 133 I.T.R. 650 (P&H) and C.I.T. v.

Ghosh [1986] 159 I.T.R. 124 (Cal).

Section 168 (3) makes it clear that the executor will

continue to be assessed until the estate is distributed

among the beneficiaries equally according to their several

interests. This provision does not enact anything different

from the pre-existing law on the subject which has been

clearly enunciated by Viswanatha Sastri, J. in Raghavalu

Naidu, cited earlier, in these words:

"Chapter VII of the Indian Succession Act, 1925, succinctly

defines the duties of executors. Shortly stated, it is their

duty to clear the estate - to pay the debts, funeral and

testamentary expenses and the pecuniary legacies, and to

hand over the assets specifically bequeathed to the specific

legatees. When all this has been done, the balance left in

the executor's hands is the residue and must be paid over to

the residuary legatees under Section 366 of the Succession

Act or held in trust for them, if the directions in the will

require the residue to be so held. Section 211 (1) of the

Succession Act constitutes the executor of a deceased person

his legal representative for all purposes and vests all the

property of the deceased in the executor. Though no time

limit is fixed by the section for the duration in the office

of executor with its powers and rights, and in this sense an

executor remains an executor for an indefinite time, the

property, which he has in the estate that devolves upon him

and over which his powers extend, does not remain his indef-

initely. By his assent to the disposition in the will they

become operative, the executor is pro tanto

divested of the property which was his virtue

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officii, and the legatees have vested in them

as owners, the property in. the subject-matter

of the bequests. Under Sections 332 and 333 of

the Succession Act, the assent of the executor

to a legacy may be express or implied from his

conduct. By assent is meant not that the

executor concurs in the dispositions in the

will but that he assents to the disposition

taking effect upon the specific property if

the bequest is specific, upon the sum of money

if it is pecuniary or upon the residue brought

out by the executor at the end of the adminis-

tration, if it is a residuary bequest. There

is the same necessity for the executor's

assent to a bequest of the residue as to a

bequest of a specific or pecuniary legacy. So

soon as he assents to the dispositions of the

will -- and the assent

597

may be express or implied from his conduct -- they become

fully operative and the title of the legatees becomes abso-

lute. If there are trusts declared or created by the will in

respect of the subject-matter of the bequest the trusts take

effect on such assent, the estate vested in the executor as

such is divested and vests in the trustees of the will. The

fact that the executors are themselves the trustees does not

make any difference. Nor does the fact that the bequest is

of the residue affect the point, once the residue has been

ascertained in due course of administration. See Attenbor-

ough v. Solomon [1913] A.C. 76.

XXXX XXXX XXXXX XXXXX

The decision in Lord Sudeley v. Attorney- General, (1897)

A.C. 11 is authority for the position that even if the

trustees and executors happen to be the same persons, until

the claims of the testator's estate for his debts and testa-

mentary expenses and the pecuniary and specific legacies

have been satisfied, the residue does not come into actual

existence. It is a non- existin thing, until that event has

occurred. The probability that there will be a residue is

not enough, but it must be actually ascertained. Dealing

with a trust of the residuary estate Lord Halsbury, L.C.

observed :'Even if the trustees and executors happen to be

the same persons,until the estate is fully administered

until the thing has been ascertained, until the trust fund

has been constituted, the thing of which the trustees are

trustees has not been ascertained. Till then the right of

the residuary legatee is to require the executors to admin-

ister the estate completely'.

XXX XXXX XXXXX XXXX

Younger, L.J. (afterwards Lord Blanesborough) in Barnardo's

Homes v. Special Income Tax Commissioners

[1921] 2 A.C. 1 stated the law in these terms:

"Until the residue is ascertained, and until its existence

as net residue has been acknowledged by the executor, either

by payment to the residuary legatee, or if the residue be

settled, by the appropriation of a fund to meet the settled

residue, the residuary legatee has no iterest in any specif-

ic part of that which subsequently becomes residue as a

specific fund but his right is, until that moment of time

arrives, to have the estate administered in

598

due course'. The House of Lords affirmed the decision of the

Court of Appeal on the ground above stated.

XXXX XXXX XXXX XXXXX

The residuary legatee might be interested in the estate

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subject to the payment of debts and legacies, but he did not

become the proprietor or owner of the residue except when a

residue had been ascertained which, on completion of admin-

istration, is made over to him by the executiors.

The question in each case is, has the administration reached

a point at which you can infer that the administration has

been completed, the residuary estate has been ascertained,

the bequest of the residue has been assessed to and the

residuary estate therefore became vested in trustees, be

they the executors themselves or strangers ?

In other words, can it be said that the residuary estate had

taken concrete shape and could and should have been handed

over by the executors to the persons beneficially entitled

but for the fact that the estate is settled in trust and

vested in the executors as trustees ?"

(Emphasis added)

We have, therefore, to look at the factual position and

find out whether the executor has ascertained the residue

and acknowledged its existence. Even taking it that the last

sentence' of the above quotation goes a little further and

enables the Court to "deem" the administration to have come

to an end where the facts clearly show that everything

necessary has been done in this regard, it is difficult to

accept the conclusion of the High Court in the present case

that the administration must be deemed to have come to an

end in the face of the factual findings in the case which

have been referred to earlier.

For the reasons discussed above, we are of the opinion

that the High Court, in the circumstances of the case,

should not have interfered with the Tribunal's finding and

that the question referred should have been answered in the

affirmative and in favour of the assessee. We, therefore,

allow the appeals and answer the above question in the

affirmative. The assessee will be entitled to his costs.

G.N. Appeals

allowed.

599