l Appeals Nos
15 to 19 of 1962
Appeal from the Judgment and order dated October 10 1958 of the Bombay High Court in Income tax Reference No 22 of 1 958
H N Sanyal Additional Solicitor General of India N D Karkhanis and R N Sachthey for the appellant
701 A V Viswanatha Sastri J B Dadachanji O C Mathur and Ravinder Narain for the respondents
October 23
The judgment of the Court was delivered by KAPUR J
These a peals pursuant to a certificate of the High Court of Bombay raise the question of interpretation of section 24B of the Income tax Act in an Income tax Reference
The question referred was answered in the negative and against the Commissioner of Income tax who is the appellant in these appeals the respondents being the heirs and legal representatives of one Amarchand N Shroff deceased
The appeals relate to the assessment years 1950 51 1951 52 1952 53 1953 54 and 1954 55
Shortly stated the facts of the case are these Amarchand N Shroff Mangaldas and Hiralal were partners in a firm of solicitors
Amarchand died on July 7 1949
Thereafter the partnership was carried on by Mangaldas and Hiralal up to November 30 1949 and on December 1 1949 Ramesh son of Amarchand who had by then qualified as a solicitor joined the firm as the third partner
After the death of Amarchand the arrangement between the various partners in regard to the realisations of the old outstandings was that in respect of the work done up to the death of Amarchand the realisations were to be divided amongst Amarchand Mangaldas and Hiralal in respect of the work between July 8 1949 and November 30 1919 the realisations were to be divided between Mangaldas and Hiralal and in respect of work done after December 1 1949 the realisations were to be divided amongst Mangaldas Hiralal and Ramesh
The firm kept its accounts on cash basis
For the five assessment years 1950 51 to 1954 55 the following amounts were received  Rs 37847  As
43162  Rs 34899  Rs 13402 and 702 Rs 32523 by the heirs and legal representatives of Amarchand out of the outstandings
The Income tax Officer sought to tax these realisations
For the assessment years 1950 51 and 1951 52 he assessed the amounts in the hands of the heirs and legal representatives of Amarchand as a Hindu undivided family
Against that order an appeal was taken to the Appellate Assistant Commissioner and then to the Appellate Tribunal
The two members of the Tribunal agreed in holding though for different reasons that the amounts were not the income of the Hindu undivided family but merely represented inheritance or realisations of the assets of Amarchand
The matter was not pursued further by the Revenue but sometime later proceedings were started by the Income tax Officer under section 34 in respect of the same income in the hands of Amarchand N Shroff by his heirs and legal representatives
The status of that entity was taken to be that of an individual and not Hindu undivided family
The various amounts were assessed to income tax in the hands of the respondents under section 341 b read with section 24B of the Income tax Act
The assessments so made were for the assessment years 1950 51 1951 52 1952 53 1953 54 and 1954 55 On appeal the Appellate Assistant Commissioner held that
the notice under section 34 could validly be served only for the assessment years 1950 51 and notices for the subsequent years were invalid
The assessments for 1951 52 to 1954 55 were therefore quashed
The Commissioner of Income tax took an appeal to the Appellate Tribunal and the Tribunal held that assessment could not be made on Amarchand and that section 24B had no application to the income received after the death of Amarchand and that it was capital receipt and not revenue receipt
The order of the Appellate Assistant Commissioner was therefore upheld On the application of the Commissioner of 703 Income tax the following question of law was referred to the High Court  Whether on the facts and in the circumstances of the case the sums of Rs 37847  Rs 43162  Rs 34899  Rs 13402 and Rs 32523 were assessable to income tax in the hands of the assessee Amarchand N Shroff by his legal heirs and representatives in the five respective years under reference 
The High Court answered the question in the negative
It held that apart from section 24E of the Income tax Act the amounts were not taxable and that the section had no application to the case
It was argued by counsel for the Commissioner of Income tax that on a correct interpretation of section 24B the amounts which were received by the heirs and legal representatives of Amarchand after his death should be deemed by the fiction incorporated in sub section
1 to be income received by Amarchand and liable to tax under section 24B 1 of the Income tax Act
In other words the respondents as heirs and legal representatives of the deceased Amarchand were liable to pay out of the estate of the deceased Amarchand on those amounts to the extent of the estate as the estate was liable for tax on the amounts received by the heirs and legal representatives just as the deceased Amarchand would have been had he not died
The emphasis was on words in section 24B 1 or any tax which would have been payable by him under this Act if he had not died
Section 24B is as follows  section 24B 11Tax of deceased person payable by represen tative 1 Where a person dies his executor administrator or other legal representative shall be liable to pay out of the estate of the deceased person to the extent to Which the estate 704 is capable of meeting the charge the tax assessed as payable by such person or any tax which would have been payable by him under this Act if he had not died
2 Where a person dies before the publication of the notice referred to in sub section 1 of section 22 or before he is served with a notice under sub section 2 of section 22 or section 34 as the case may be his executor administrator or other legal representative shall on the serving of the notice under sub section 2 of section 22 or under section 34 as the case may be comply therewith and the Income tax Officer may proceed to assess the total income of the deceased person as if such executor ad ministrator or other legal representative were the assessee
3 Where a person dies without having furnished a return which he has been required to furnish under the provisions of section 22 or having furnished a return which the Income tax Officer has reason to believe to be incorrect or incomplete the Income tax Officer may make an assessment of the total income of such person and determine the tax payable by him on the basis of such assessment and for this purpose may by the issue of the appropriate notice which would have had to be served upon the deceased person had he survived require any accounts documents or other evidence which he might under the provisions of sections 22 and 23 have required from the deceased person
 Sub section 1 provides that where a person dies his heirs and legal representatives are liable to pay out 705 of the estate of the deceased the tax assessed as payable by the deceased or any tax which would have been payable under the Act by the deceased if he had not died
According to the submission of counsel for the Commissioner of Income tax the words of sub section
1 or any tax which would have been payable by him under this Act if he had not died mean that irrespective of the date of  receipt of income receivable by a person if the income is received by his heirs and legal representatives after his death they are liable for payment of the tax just as the deceased would have been liable when the income was received had he been living
But this interpretation is not in accord with the language used in s24B All the sub sections have to be read together
Sub section 1 can be divided into two parts 1 where the income of the deceased was assessed before his death and 2 where the income was not so assessed but it would have been liable to tax had he not died
The second part or the words above quoted when read with sub sections 2 and 3 show that they are confined to cases therein mentioned
They show that those words also have to be restricted to the income received by the deceased person before his death and to the income received after his death by his heirs and legal representatives but in the previous year and which had not been assessed but would have been assessed as income received by him if death had not taken place
See Allen vs Trehearne1 where the words if he had not died were interpreted
Sub section 2 provides that if a person dies before the publication of the public notice under s22 1 or before a notice is served on him under sub sections 2 of section 22 or section 34 then the Income tax Officer may proceed to compute or assess the total income of the deceased person as if the heirs and legal representatives were the assessees Sub section 3 provides that when a person dies before a return is furnished by him under the provisions of section 22 or dies after having furnished the return which the 1 1938 22 Tax
15 706 Income tax Officer finds incorrect or incomplete then the Income tax Officer can make assessment on the total income of the deceased person and certain other consequences follow but in all the cases enumerated above the language used in sub sections 1 2 and 3 of s24B contemplates that the heirs and legal representatives of a deceased person are liable to pay income tax out of his estate 1 where assessment had already been made and 2 where he dies before the assessment but the income was received before his death or by his heirs and legal representatives after his death which occurs during the previous year
If he dies before the publication of the notice under S221 or before the service under s222 or after the service but before he has furnished a return or filed an incorrect or incomplete return then the Income tax Officer should make an assessment of the total income of such deceased person and determine the tax payable thereupon
Section 24B does not authorise levy of tax on receipts by the legal representatives of a deceased person in the years of assessment succeeding the year of account being the previous year in which such person died
Income tax is exigible in reference to a person s total income of the previous year
The question before us is whether the income which was received subsequent to the previous year in which Amarchand died is liable to be assessed to income tax under section 24B as his income in the hands of his heirs and legal representatives
In the present case the accounts were kept on cash basis
The assessee under the Act has ordinarily to be a living person and cannot be a dead person because his legal personality ceases on his death
By section 24B the Legal personality of a deceased assessee is extended for the duration of the entire previous year in the course of which he died and therefore the income received by him before his death and that received by his heirs and legal representatives after his death but in that previous 707 year becomes assessable to income tax in the relevant assessment year
The section was enacted by the Legislature to bring to tax after his death income received during his lifetime and fill up the lacuna which was pointed out by the High Court in Ellis C Reid vs Commissioner of Income tax Bombay1
Any income received in the year subsequent to the previous or the account year cannot be called income received by the person deceased
The provisions of section 24B do not extend to tax liability of the estate of a deceased person beyond the previous or the account year in which that person dies
In support of his contention counsel for the Commissioner of Income tax relied upon the scheme of the Act as given in Additional Income tax Officer vs E Alfred2
There is nothing said in that case which supports the contention raised by the Commissioner of Income tax
Reliance was next placed on certain observations in a judgment of the Bombay High Court in re
B M Kamdar3
Those observations also are of no assistance to the Commissioner of Income tax Kania J as he then was there observed that the question whether a particular amount was income or not had nothing to do with the time of its receipt and the question of receipt was material
only for the purpose of determining whether on that amount tax was to be levied under the Act in the year of assessment
That was a case where a consulting engineer discontinued his practice as such from February 15 1938 and he received a sum of money representing the outstanding professional fees earned by him prior to the discontinuance of his practice but realised by him during the Calendar year which was the previous year
The assessee was keeping is accounts on cash basis and he contended that as he had discontinued his profession in the previous year the source had come to an nd and the amounts received by him were not liable to income tax
It was held that the income was assessable
The assessee in that case was still alive when the income 1 2  445 3 1946 14 l
TR 10
708 was received by him and section 24B had no application to the facts of the case
Counsel also relied on the observations of Derbyshire CJ in re Sreemati Usharani Shoudhurani1
In that case the managing agent of a limited company died on May 12 1938
At the time of his death there was a credit with the company of a sum of money on account of commission earned by him and due to him prior to the date of his death
This sum was paid after his death in the previous year 1938 39 and was sought to be taxed under section 24B of the Income tax Act
It was held that this income was taxable
Derbyshire CJ said at p 205 that the assessee who was the widow had received the salary due to her husband that the Income tax Officer was entitled to assess the total income of the deceased person as if the legal representatives were the assessees and the amount was liable to tax under section 24B 1 but in that case also the amount was received by the widow in the previous year and it was earned by the deceased during the previous year
The correct position is that apart from s24B no assessment can be made in respect of the income of a person after his death
See Ellis C Reid vs Commissioner of Income tax Bombay2
In that case and that was a case before section 24B was enacted a person was served with a notice under section 222 of the Income tax Act but no return was made within the period specified and he died
It was held that no assessment could be made under section 234 of the Act after his death
At p106 it was observed  The is to be noticed that there is through the Act no reference to the decease of a person on whom the tax has been originally charged and it is very difficult to suppose the omission to have been unintentional It must have 1 2 709 been present to the mind of the legislature that whatever privileges the payment of income tax may confer the privilege of immortality is not amongst them
Every person liable to pay tax must necessary die and in practically every case before the last instalment has been collected and the legislature has not chosen to make any provisions expressly dealing with assessment of or recovering payment from the estate of a deceased person
The individual assessee has ordinarily to be a living person and there can be no assessment on a dead person and the assessment is a charge in respect of the income of the previous year and not a charge in respect of the income of the year of assessment as measured by the income of the previous year
Wallace Brothers  Co Ltd v Commissioner of Income tax Bombay City2
By section 24B the legal representatives have by fiction of law become assessees as provided in that section but that fiction cannot be extended beyond the object for which it was enacted
As was observed by this Court in Bengal Immunity Co Ltd vs The State of Bihar2 legal fictions are only for a definite purpose and they are limited to the purpose for which they are created and should not be extended beyond that legitimate field
In the present case the fiction is limited to the cases provided in the three subsections of section 24B and cannot be extended further than the liability for the income received in the previous year
In the present case the amounts which are sought to be taxed and which have been held not to be liable to tax are those which were not received in the previous year and are therefore not liable to tax in the several years of assessment
It cannot be said that they were income which may be deemed by fiction to have been received by the dead person and therefore they are not liable to be taxed as income 1  244
2  664
710 of the deceased Amarchand and are not liable to be taxed in the hands of the heirs and legal representatives who cannot be deemed to be assessees for the purpose of assessment in regard to those years
In our view the High Court rightly answered the question in the negative and against the Commissioner of Income tax
The appeals therefore fail and are dismissed with costs
Appeals dismissed


Summary:
Sub section 1 of section 24B of the Indian Income tax Act 1922 provided that where a person dies his heirs and legal representatives ate liable to pay out of the estate of the deceased the tax assessed as payable by the deceased or any tax which would have been payable under the Art by the deceased if he had not died
A who was one of the three partners in a firm of solicitors died
on July 71949 and thereafter the partnership was carried on by the other two partners till December 1 1949
when R son of A joined the firm as the third partner
After the death of A the arrangement between the various partners in regard to the  realisations of the old out standings was that in respect of the work done up to the death of A the realisations were to be divided between A and the other two partners
The firm 700 kept its accounts on cash basis For each of the five assessment years 1950 1955 certain amounts were received by the heirs and legal representatives of A out of the out standings
Proceedings were started by the Income tax Officer under section 34 of the Indian Income tax Act 1922 in respect of the aforesaid
income and the various amounts were assessed to income tax in the hands of the respondents the heirs and legal representatives of A under section 34 1 b read with section 24B of the Act for the five respective assessment years on the footing that the amounts which were received by the heirs and legal representatives of A after his death should be deemed by virtue of the words in sub section
1 of section 24B to be income received by A and liable to tax under that sub section
Held that the words or any tax which would have been payable by him under this Act if he had not died under section 24B1 of the Indian Income tax Act 1922 are restricted to the income received by the deceased person before his death and to the income received after his death by his heirs and legal representatives in the previous year and which had not been assessed but would have been assessed as income received by him if death had not taken place
The provisions of section 24B do not extend to tax liability of the estate of a deceased person beyond the previous or the account year in which that person dies
Apart from section 24B no assessment can be made in respect of the income of a person after his death
Held that as the income was received after the expiry of the previous year in which A died it was not liable to be taxed as the income of A in the hands of his legal representatives in the several years of assessment
Allen vs Trehearne  Ellis C Reid vs Commissioner of Income tax Bombay and Wallace Brother  Co Ltd vs Commissioner of Income tax Bombay City 1948 16  referred to