COMMISSIONER OF INCOME-TAX Vs. VRAMASWAMI IYENGAR AND KBSUBRAMANIA IYER, RECEIVERS TO THE ESTATE OF LATE RMARARRMARUNACHALAM CHETTIAR

JUDGEMENT

(1.) In The Commissioner of Income-tax, V/s. Reid (1930) I.L.R. 55 Bom. 312 which was decided on the 3 October, 1930, the Bombay High Court held that the Indian Income-tax Act contained no provision under Which the estate of a deceased person could be taxed. The definition of "assessee" under Section 2(2) of the Act only applied to a living person. In Maharajadhiraj of Dharbanga V/s. Commissioner of Income-tax, Bihar and Orissa (1934) 67 M.L.J. 422 : L.R. 61 I.A. 318 : I.L.R. 13 Pat. 607 (P.C.) which related to an assessment made in the year 1929-30, the Privy Council held that Section 26(2) applied to a person who succeeded to the business of a deceased person and therefore the successor could be taxed in respect of the income obtained from the business in the year of succession. On the 11th September, 1933, the Legislature inserted Section 24-B. Stated broadly, the question which arises here is whether Section 24-B overrides Section 26(2) and requires, in the case of a person dying leaving a business, the assessment to be made on his executor, administrator or other legal representative, as if he had not died.

(2.) This reference arises out of the assessment made on the receivers of the estate of one RM. AR. AR. RM. Arunachalam Chettiar, who died on the 23 February, 1938. He was survived by his two wives and the widow of a predeceased son. He left a will and therein appointed executors. The estate is now being administered by the Court of the Subordinate Judge of Devakottai, who appointed the receivers. In Appeals Nos. 321 of 1940, and 3, 104 and 239 of 1941, this Court had to decide the rights of the widows and the son's widow. The deceased had large assets which included a money lending business in British India with branches in Ceylon, the Federated Malay States and in French Cochin China. The decision of this Court, so far as it affects the present case, was that the deceased's widows and the son's widow were entitled, to the movable assets in British India, but that the son's widow did not share in the movable assets outside British India. The three ladies can be regarded as the successors to the deceased's business, although not in equal shares. -

(3.) In the present case the year of account is from the 12 April, 1937, to the 12 April, 1938. The Income-tax Officer held that the receivers were to be assessed to income-tax and super-tax in respect of the whole of the estate, including the profits of the business. The receivers contended that the profits of the business should be separately assessed and the tax levied on the widows under Section 26(at). The appellate Assistant Commissioner upheld the order of the Income-tax Officer but on appeal to the Income-tax Appellate Tribunal, Calcutta Bench, the receivers contention was accepted. At. the request of the Commissioner of Income- tax the Tribunal has referred the following question under Section 66 of the Income-tax Act Whether in the circumstances of this case the entire assessment has to be made under Section 24-B of the Act or has the assessment to be split up into two portions, one falling under section a6(a) and the other falling under Section 24-B of the Act?