Facts

One Mrs. Bhikhubai Chandulal Jalundhwala, a resident of Bombay, executed a will  on 5-1-1962. She died three days after on 8-1-1962. During her life-time she was possessed of considerable properties, both movable and immovable. K.R. Patel, the appellant, and B.G. Amin, solicitor, since dead, were appointed as executors and trustees under the will. The executors and trustees under the will were directed first to pay all the debts, funeral, death and other testamentary expenses, estate duty, Government dues as soon as possible. Two immovable properties under the will were bequeathed to two different individuals. It was provided in the  will  that the executors and trustees should convey these immovable properties after obtaining probate of the will and until this was done, to deal with the rents and income arising therefrom in the same manner as the other estate.

On 19-6-1963, an application was filed by the executors and trustees under section 18 of the Bombay Public Trust Act, 1950, for registration of the  public trust created under the will. The application was filed under protest. It was contended that it was  not  a  case of  creation of  a  trust under the  will but  was  a  case of assignment of power to deal with estate in the manner indicated      in the will. However, it was held that the trust properties vested in the two executors and trustees as trustees under the terms of the will as well as under section 211(1) of the Indian Succession Act, 1925. It was also held that the trust was a public trust. The trust wasregistered on 29-12-1964.

Executors and trustees filed income-tax return for the assessment year 1964-65   and Return was signed as executors of the will.

Issue

Before the ITO, it was contended that the income-tax return was  assessable in  the hands of the executors and trustees as trustees and not as executors and   that since the properties left behind by the testator were held under trust for wholly charitable and religious purposes, its income was exempt from tax under section 11(1) of the Act. Various other contentions were raised but all these were rejected by the ITO who assessed the income in the hands of the executors and trustees as executors.

View

Examining the will read  with  other clauses, it  is  apparent that  the  trust was to come into being only after funeral and other expenses were met, legatees paid and properties converted into cash by the executors and trustees. That the administration of the estate would come to an end and all the amount, thus, lying with the executors and trustees would form the corpus of the trust. Functions of  the trustees and executors as imposed upon them did not come to an end till February 1964.

Held

It cannot be said that there was any trust created under the will till February  1964. Section 168(3) of the Act makes it clear that executor will continue to be assessed until the estate is distributed among the beneficiaries according to their several interests. (AY. 1964-65) (CA No. 5649 of 1990 dt. 27-8-1999)

Editorial: CIT v. K. R. Patel [1985] 151 ITR 250 (Bom) (HC) is affirmed. The contents of the will are very important to decide whether the executors are to be assessed as executors per se, or representative assessee or Trustees.

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– Mahatma Gandhi