ORDER
Judgement pronounced by R. Jayasimha Babu, J.
1. The reference before us concerns the true scope of Section 168 of the Income-tax Act, as to whether it's application is confined to income of estates of deceased persons who died testate, or would extend to income of estates of persons who died intestate.
2. That Section is found in Chapter XV titled 'liability in Special Cases' in Part-E under the heading Executors. Section 168 reads thus:
Executors: (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 resident or non-resident during the previous year in which his death took place.
(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 shall be made under this Section in 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 distributed to, or applied to the benefit of, any specific legatee of the estate during the previous year shall 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,
3. The Section deals with the income of the undistributed estate of a deceased person. It is made chargeable to tax in the hands of the Executor/s. Such income is to be assessed separately from the date of death of the deceased person to the date of complete distribution of his estate to the beneficiaries. The income is to be assessed in the hands of the Executor, excluding therefrom any income distributed to, or applied to the benefit of any specific legatee during the previous year. Income so excluded is to be included in the total income of such specific legatee for that year.
4. The Section is captioned 'Executors'.
The Assessable Person is the Executor. If there is more than one Executor, they are to be assessed as an association of persons. 'Executors' are referred to in Sub-Sections (1) and (2). Sub-Section (3) contemplates the complete distribution of the estate of the deceased to the beneficiaries. Sub-Section (4) refers to the income distributed to or applied to the benefit of 'specific legatees'. The Explanation stretches the term Executor to include 'an Administrator or other person administering the estate of a deceased person.'
5. The reference before us was necessitated by the diametrically opposing interpretation by two Division Benches of this Court of the words 'or other person administering the estate of a deceased persons' in the Explanation. A Division Bench of this Court in the case of Commissioner of Income Tax v. Smt. B. Dhanalakshmi and others : [1995]215ITR662(Mad) held that, Section 168 is applicable only to income of the Estates of deceased persons who died testate. A later Division Bench in the case of Commissioner of Income-tax v. P. Visalakshi and P. Savithri : [1996]217ITR282(Mad) , it must be noted with regret, purported to 'correct' the law declared in the case of Dhanalakshmi case : [1995]215ITR662(Mad) and held that the Section also applies to income, of the estate of person who had intestate on the ground that though the estate vests in the heirs, there could still be unity of possession till actual division is effected. Judicial propriety required the later Division Bench to refer the matter to a Larger Bench, if it was unable to agree with the enunciation made by the earlier Division Bench.
6. The factual matrix in which these decisions were rendered, as also in T.C.No.1282 of 1982, which has been referred to the Full Bench, is the same. The assessees concerned are the four daughters of one Periaswamy, who died intestate on the 28th of August, 1975 leaving behind him as his heirs, his wife, his mother and four daughters. The estate left by him on his death was half share in a building which had been rented out, and deposits in a firm in which he had been earlier a partner. The rental income and the interest were assessed by assessing officer in the hands of each of the heirs, to the extent of their shares. The appellate authority, and the Tribunal held that the assessment had to be made in the hands of the widow of the deceased Smt. Balammal, who was managing the estate of the deceased, division by metes and bounds not having been effected among the co-owners. While in the case of Dhanalakshmi case, 1995 (215) I.T.R. 662 a Division Bench of this Court held that that decision of the Tribunal was erroneous in law, another Division Bench in the case of Visaiakshi case, 1996 (217) I.T.R. 282, upheld that view of the Tribunal. When the case of the other sister Manonmani came up before yet another Division Bench, the inevitable reference to the Full Bench had to be, and was made.
7. The assessable person under S. 168 is the Executor. An Administrator is also an Executor for purpose of this Section by virtue of the Explanation. Neither term has been defined in the Act. One has necessarily to look to the Indian Succession Act for ascertaining their meaning. 'Administrator' is defined in S. 2(a) of that Act. as 'a person appointed by competent authority to administer the estate of a deceased person when there is no executor'. 'Executor' is defined in Section 2(c) of that Act as 'a person to whom the execution of the last will of a deceased person is, by the testator's appointment confided.
8. Estates of persons dying intestate can also be subjected to administration, and administration granted to the persons specified in S. 218 or S. 219 of the Succession Act. Letters of Administration, as provided in S. 220 of that Act entitle the Administrator to all rights belonging to the intestate, as effectually as if the administration had been granted, at the moment of his death.
9. The character and property of Executor or Administrator as the case may be of a deceased person is dealt with in section 211 of that Act. The Executor or Administrator is his '.... legal representative for all purposes...' and all the property of the deceased, excluding that which would have passed by survivorship to some other person, vests in him.
10. The powers of an executor of an administrator are set out in Sections 305 to 315 of the Succession Act. He has the power to sue in respect of all causes of action that survive the deceased; he may be sued in respect of demands and causes of action against the deceased, except those specified in S. 306; he may dispose off the property of the deceased subject to the restrictions and limitations set out in S. 307; and he has the general powers of administering the property of the deceased.
11. The assent to a legacy by the executor or administrator is essential for completing the legatee's title to the legacy, as provided in Section 332 of the Succession Act. Such assent, when given gives effect to the legacy from the time of death of the testator.
12. While there can be no Executor without a will, the existence of a will is not a pre-condition for the appointment of an Administrator. Administration can be granted not only in cases where a will exists but does not name an executor, but also in cases where the deceased had not executed a will. The Executor if there is one, and the Administrator where one is appointed, is the legal representative of the deceased, and the property of the deceased vests in such Executor or Administrator. While an Executor has the power to distribute the property of the deceased among the legatees, all Administrators do not have such powers, such as an Administrator pendente lite. The vesting of the legacies in the legatees requires the consent of the Executor where there is one, or of the Administrator where one is appointed with powers to distribute the legacies.
13. In case of wills which are executed at places falling outside those specified in S. 57 of the Succession Act, and not relating to immovable property within the areas specified in S. 57(a) by persons belonging to the religions specified in S. 58 of the Succession Act and by exempted persons, it is not essential to obtain probate or letters of administration. In such cases, the estate of the deceased where no executor has been appointed by the testator may for some time be under administration by one of the legatees. A person so administering the estate, without having obtained administration from the Court, cannot be regarded as Administrator for the purpose of Indian Succession Act. Such a person could not have been regarded as Administrator for purpose of S. 168 of the Income-tax Act, but for the Explanation to Section 168. The reference in the Explanation to '... other person administering the estate of a deceased person' is intended to apply to those persons who are found to be administering, without having been appointed by the Court as Administrator, the estate of a deceased person who has left behind a will without naming an executor, and in -respect of whose wills it is not necessary to obtain Letters of Administration and have an Administrator appointed by a Court.
14. Administrators appointed by Court in respect of estates of those dying intestate are made assessable under S. 160(1)(iii) of the Income-tax Act as representative assessees- as persons appointed by or under any order of a Court who receiver, or is entitled to receive, income on behalf or, for benefit of any other person.
15. Parliament has made a special provision in S. 168 in respect of income from Estates of persons dying testate, by-in effect, deeming the continued existence of the deceased testator till such time as the administration of his estate is completed by the distribution of all the legacies in terms of his will. The undistributed income from such estate is made assessable, by treating it as the income of an individual or association of persons depending upon whether there is only one or a plurality of executor or administrator -whether de jure or de facto.
16. The intention to apply this provision only to income from estates of those who died testate, is evident from the caption viz., 'Executor' of the part in which this Section occurs, which caption is applicable only to cases where deceased had left a will; the reference in sub-Section (4) to 'specific legatees, who can exist only in cases where a will is in existence; the scheme of the provision which contemplates the existence of an estate which needs must be administered which would be the case where the deceased has left a will; the reference in sub Section (3) to the distribution of the estate to the 'beneficiaries' who can only exist where there is will, such beneficiaries trading their right to the will, which confers such benefit on them; the notable omission to use the term 'heirs' in any part of the Section which term would have been used had it been the intention to apply the provision to cases of intestate succession, as such heirs are not 'beneficiaries' depending for their legacy on a testamentory instrument, but who solely by reason of their relationship with the testator are by law entitled to succeed to the estate of the deceased, and in whom the estate vests in defined shares where there is more than one heir, at the moment of the death of the testator.
17. The 'estate' referred to in S. 168 is an estate succession to which is governed by a will executed by the deceased income from which is charged to tax under S. 168, and is not the estate of a person who dies intestate.
18. After having provided for a separate part for Executors, in the Chapter dealing with the liability in special cases, and providing therein for the assessment of the executors till the date of complete distribution to the beneficiaries of the estate, and also providing for the exclusion from such assessments of the income distributed to, or applied for the benefit of any specific legatee of the estate during the relevant previous year. Parliament did not intend to suddenly by the back door as it were enlarge the scope of the provision to take within it's fold estates of all deceased persons irrespective of whether the deceased had died testate or intestate. The explanation at the end of Sub-Section 4 is only intended to clarify that irrespective of the nomenclature and irrespective of whether the person administering the estate of such a deceased who had died testate was appointed by the Court, the Section is to apply to all persons, whether de jure or de facto administering the estate, of a deceased person who has died testate. Had it been the intention of the Parliament to make the income of estates of all deceased persons prior to the distribution thereof to those entitled thereto the subject matter of this provision, the language appropriate only to the estates of those who died testate would not have been employed.
19. While ascertaining the true scope of a provision in a statute, attention must necessarily be paid not only to the text viz., the words employed in the relevant provision, but also the context. The Supreme Court in the case of Reserve Bank of India v. Peerless General Insurance Finance and Investment Co., Ltd. : [1987]2SCR1 observed: 'Interpretation must depend on the text and the context. They are the bases of interpretation.....'
20. The test adopted by the Bench in the case of Visaiakshi case : [1996]217ITR282(Mad) as to whether despite the vesting of title in the heirs in cases of intestatecy there can be unity of possession - for holding that S. 168 applies to income from estates of intestates, is not the proper test for deciding the scope of the provision. The text of the provision and context in which it occurs clearly indicate that this provision was intended to apply only to income for estates of persons who died testate.
21. The words 'or other person administering the estate' found in Explanation to Section 168 of the Income-tax Act, therefore, are not to be read as having brought within it's fold every de facto administrator of every undistributed estate of every deceased person whether or not the deceased had executed a will.
22. The question as to whether an administrator pendente lite appointed by the Court during the pendency of probate proceedings can be regarded as an Administrator for the purposes of Section 168 of the Income-tax Act was considered by the Calcutta High Court in the case of Mahamaya Dasi v. Commissioner of Income-tax 1980 (126) ITR 740. The Court, speaking through Sabyasachi Mukharji, J (as he then was) held that the administrator pendente lite, was different from the administrator contemplated by Section 168 of the Income-tax Act and that Section 68 would not apply to such Administrator pendente lite. The court observed:
'We have noted S. 168 and Sub-section. (3) and (4) of the I.T. Act, 1961. Section 168, in our opinion, contemplates the distribution of the assets in the case of the administration of an estate by the executor. If the executor or the administrator cannot distribute the assets then sub-s.(3) and Sub-section (4) would be, inappropriate.'
23. In the case of Commissioner of Income-tax, Gujarat-I v. Navnitlal Sakarlai 1980 (125) I.T.R. 67, a Division Bench of the Gujarat High Court, speaking through Divan. C,J., held that:
'..... .the word 'executor' in S. 168 means an executor as known under the Indian Succession Act as well as an administrator known under the Indian Succession Act, and what is more, any other person, administering the estate of a deceased person is also included in this special definition of the word 'executor' though, under the Indian Succession Act, such other person administering the estate of the deceased would never be referred to either as an 'executor' or as an 'administrator'.
24. A Division Bench of the Bombay High Court in the case of Commissioner of Income-tax v. Mrs. Usha D. Shah : [1981]127ITR850(Bom) speaking through M.N. Chandurkar, J, (as he then was) held that the mother of the deceased who had died intestate would be assessable under Section 168 during the period when there were disputes between her and the assessee whose status as daughter-in-law was under dispute. That decision was explained by a later Division Bench of the same Court speaking through the same learned Judge, in the case of Commissioner of Wealth-tax v. Keshuf Mahlndra 1980 (139) I.T.R. 23. The Court at page 46 of the report noted that the entire estate left behind by the husband of the assessee Usha was being managed by her mother-in-law, who had disputed the very status of the assessee as the wife of her son. and that there was ultimately a settlement as a result of which certain sum was paid to the assessee as the widow. For the assessment years which preceded the date of the settlement, the daughter-in-law whose status during those years was very much in dispute could not be assessed to tax by treating her as one of the sharers in the income of the estate of her husband.
25. This Court in the case of A. & F. Harvey Ltd. v. C.W.T. 1977 (107) I.T.R. 327 while considering the scope of Section 19A of the Wealth-tax Act, the explanation to which is in identical terms to the explanation to Section 168 of the Income-tax Act observed that:
'It is clear from the express language of the Section that it provides for assessment of the assets of a deceased in the hands of the executor or executrix. From the very nature of the case, the Section will apply only to cases wherein assessee dies having executed a will and appointed an executor or executrix. If he had died intestate, the estate would have gone to his heirs and, therefore, it is in the hands of the heirs that the assessment will have to be made and not in the hands of anybody else.'.
26. In the case of Commissioner of Wealth-tax v. Keshub Mahindra, 1980 (139) I.T.R 23, the Bombay High Court held that Section 19A of the Wealth-tax Act is applicable only to cases where the deceased had died after executing a will.
27. The Income-tax Act and the Wealth-tax Act operate in two different fields, while the first deals with income received or accrued throughout the assessment year. The other deals with net wealth as on the valuation date. That, however, does not make any significant difference to the interpretation of Section 19A of the Wealth-tax Act and Section 168 of the Income-tax Act, in so far as explanations attached to those provisions which are couched in identical language are concerned.
28. We hold that extended definition of 'executor' given in the explanation to Section 168 of the Income-tax Act is only intended to apply to the defacto administrator of the estate of a deceased person, who has died testate, besides the person to whom letters of administration with a copy of the will annexed is granted by the Court. Section 168 of the Income-tax Act is inapplicable to income from estates of persons who have died intestate. The questions referred to us in all these tax references on this aspect is answered accordingly.
29. The other question referred on the assumption that Section 168 of the Act applies even in cases of intestacy is answered in the negative.