Income Tax Appellate Tribunal - Delhi
V.K.S. Bawa vs Assistant Commissioner Of Income-Tax on 29 September, 1995
Equivalent citations: [1996]56ITD232(DELHI)
ORDER
Manzoor Ahmed Bakhshi, Judicial Member
1. These two appeals of the assessee relating to assessment years 1992-93 and 1993-94, involving common issue, are disposed of by this consolidated order. The issue involved is relating to exemption claimed under Section 54F of the Income-tax Act, 1961 out of the capital gains derived by the assessee in the aforementioned assessment years. Relevant facts are that assessee had sold certain shares in March 1992 in consideration of Rs. 21,71,680. Since the cost of the shares was Rs. 23,000 only, the capital gain on the sale of shares was Rs. 21,48,680. Assessee had purchased a house property in New Friends Colony jointly with her daughter Mrs. Ushmi Sethi in July 1992 in consideration of Rs. 80 lacs. The investment had been made by the two owners as under:
Rs.
Mrs. V.K.S. Bawa (the assessee) 57,55,371.50 Mrs. Ushmi Sethi 22,44,628.50
Assessee has met the consideration from the sale of shares and jewellery. The capital gains on the sale of shares had been disclosed by the assessee in assessment year 1992-93 as well as in assessment year 1993-94. However, benefit under Section 54F was claimed in respect of the entire capital gains. The Assessing Officer rejected the claim of the assessee on the ground that one of the conditions for grant of the benefit under Section 54F was not satisfied in so far as assessee was the owner of another residential house property at No. 1, Jor Bagh. In this connection, reference has been made by the Assessing Officer to the income-tax and wealth-tax returns filed by the assessee as also to the will of Mrs. S.D. Puri by virtue of which the aforementioned share in the residential house property had been bequeathed in favour of the assessee.
2. The assessee appealed to the CIT (Appeals), who vide consolidated order dated 21-2-1995, agreed with the Assessing Officer and dismissed the appeals of the assessee.
3. The assessee is in appeal before us. A paper book containing 39 pages had been filed by the assessee before the date of hearing and as required under rules a certificate was given in respect of the papers filed, that these had been filed before the Revenue Authorities. Certain papers were also filed during the course of hearing of the appeal on the directions of the Bench. The learned counsel for the assessee contended that assessee was not the legal owner of the Jor Bagh property in so far as the mutation in respect of the said property had not been done by the L & DO authorities. It was contended that the property was bequeathed by Mrs. S.D. Puri, the mother of the assessee in the year 1978 by a will duly registered and that Mrs. S.D. Puri expired in 1984. Though the other properties had been distributed amongst the legatees, the property situated at Jor Bagh could not be so distributed as the L&DO authorities had demanded unearned increase on the basis of the lease deed relating to the land. According to the learned counsel, the property in question could not be said to be owned by the assessee unless mutation was effected in favour of the assessee. In this connection, our attention was drawn to the application dated 24-7-1991 filed by Shri V.P. Puri in the Ministry of Works and Housing, Land and Development Office, Nirman Bhavan, New Delhi for mutation of the property and the reply of the said authorities declining to mutate the property in favour of the beneficiaries of the will of the deceased lessee Mrs. S.D. Puri unless the payment of 50 per cent unearned increase was paid to them. According to the learned counsel, since the executor/administrator of the will was unable to pay the demand to the L&DO authorities, the property could not be handed over to the legatees as per the will of the deceased. It was further contended by the learned counsel, that unless mutation was effected in favour of the assessee in respect of the 1 /4th share of Jor Bagh property, she could be said to be the legal owner of the house property and as such benefit of Section 54F could not be denied on the ground that she was the owner of residential house apart from the residential house purchased by her. It was further contended by the learned counsel that in so far as the property was not distributed amongst the legatees, the assessment of the same was to be made in the hands of the executors under Section 168 of the Income-tax Act, 1961. The learned counsel also pointed out that tenants of the premises, namely, M/s Asea Brown Boveri Ltd. were paying the rent by cheques in the joint names of Mrs. V.P. Puri and Mrs. V.K.S. Bawa. The rent, according to the learned counsel, was being collected as administrators of the property and after meeting the expenses the proceeds of rent were distributed amongst the legatees. The learned counsel also pointed out that Shri S.L. Bawa one of the executors having died on 14-9-1988. The rent was being collected in the name of Shri V.P. Puri and Smt. V.K.S. Bawa. Relying upon the decision of the P&H High Court in the case of CIT v. Bakshi Sampuran Singh [1982] 133 ITR 650 at page 655, the learned counsel contended that mutation of the property was necessary for completion of the administration of the will. Our attention was also invited to Section 211 of the Indian Succession Act, 1925 in support of the contention that the property vests in the executor though he is not the owner of the property. Reliance was also placed on the decision of the Supreme Court in the case of Navnit Lal Sakarlal v. CIT [1992] 193 ITR 16 at pages 25 to 27 in support of the contention that the executor continues to be assessable under Section 168(3) until the estate is distributed amongst the beneficiaries according to their several interests. Reliance was placed on the decision of the Karnataka High Court in the case of Estate of Late H.H. Rajkuerba, Dowager Maharani Saheb of Gondal v. CIT [1982] 135 ITR 393 in support of the contention that the mere fact that the transfer is complete when the administration of the will is complete and it relates back to the date of death of the testator does not mean that mutation was unnecessary. The learned counsel relied upon clause 13 of the lease deed executed by the testator with President of India by virtue of which assessee was liable to pay 50 per cent of the unearned increase in respect of the property transferred. Reliance was placed on the decision of the Karnataka High Court in the case of CIT v. R. G. Mundkur [1991] 189 ITR 597 in support of the contention that unless unearned increase was paid, the transferee would not become the absolute owner. Shri Syali further contended that Section 168 was a special provision for assessment in the case of executors and administrators till the property was distributed. Section 54F is a beneficial provision and its benefit could not be denied unless assessee was the legal owner of the property it was contended. According to Shri Syali, the benefit could not be denied merely because assessee was beneficial owner of the property. Shri Syali further contended that once Section 168 was applicable, no other provision of the Act would be applicable.
4. It was further contended that the Tribunal should consider the principles of equity in deciding the issue under consideration. When confronted that the executor / administrator had filed the return of income in respect of the estate of the deceased only for assessment year 1985-86 and not in the subsequent assessment years, the learned counsel contended that his failure to file the returns of income would not justify the inference that the property in question had been distributed amongst the legatees. The effect of the matter, according to the learned counsel, is that the income was assessable in the hands of the executor and administrator under Section 168 the mere fact that no assessments had been made under the said section, would not be sufficient to deny the benefit of Section 54F to the assessee, contended the learned counsel.
5. Referring to the suggestion of the Bench that keeping in view the conduct of the legatees and executors into consideration, could it be deemed that there was distribution of the assets, the learned counsel contended that though the Assessing Officer has suggested in the assessment order about the deemed distribution of assets amongst the legatees, CIT (Appeals) has not recorded any finding in regard to this issue. It was accordingly contended that in case the Tribunal considers it necessary to decide this issue, the matter accordingly should be referred back to the CIT (Appeals) for recording a finding on this issue as assessee could not be deprived of a forum of appeal available to him in this regard in the shape of first appellate authority. In this connection, reliance was placed on the decision of the Supreme Court in the case of CIT v. Shapoorji Pallonji Mistry [1962] 44 ITR 891. The learned counsel further contended that the Department cannot take advantage of the returns filed by the assessee as the principle of estoppel does not apply to income-tax proceedings. In this connection, reliance was placed on the decision of the Delhi High Court in the case of CIT v. Bharat General Reinsurance Co. Ltd. [1971]81 ITR 303. The learned counsel clarified that the other property of the deceased had been distributed according to the will but since in the case of Jor Bagh property the difficulty had arisen in view of the objection of the L&DO authorities, the said property could not be distributed amongst the legatees. The learned counsel for the assessee further contended that the Delhi High Court in the case of Sushil Ansal v. CIT [1986] 160 ITR 308 held that unless the property was registered in the hands of the assessee, he could not be held to be owner of the property and that the income from the said property could not be assessed under the provisions of Section 22 to Section 26 of the Act. The learned counsel for the assessee accordingly contended that since the assessee was not the owner of the property in the absence of mutation not having been done in her favour in the records of L & DO, she could not be said to be the owner of the residential property within the meaning of Section 54F. Reliance was placed on the decision of the Calcutta High Court in the case of I.M. Thapar, Executor to the Estate of Late Lala Karam Chand Thapar v. CIT[ 1979] 116 ITR 797 in support of the contention that assessment was to be made in the hands of the executors under Section 168 upto the period administration of the estate is completed. Reliance was also placed on the decision of the Andhra Pradesh High Court in the case of CWT v. S.M. Bhandari [l 987] 167 ITR 643 in support of the contention that Sub-section (4) of Section 168 is not applicable. It was accordingly contended that the appeals of the assessee may be accepted and the benefit under Section 54F allowed to the assessee.
6. The learned D.R. Smt. Kavita Pandey, on the other hand, contended that the contentions raised on behalf of the assessee are after-thought and contrary to the material on record. Our attention was invited to the certificate on the paper book certifying that all the papers contained in the paper book have been filed before the Assessing Officer as well as before the CIT (Appeals). (This certificate is issued by M/s M.S. Associates and is duly signed by Mr. Satyen Sethi.) Mrs. Pandey pointed out that Page No. 22 has neither been filed before the Assessing Officer nor before the CIT (Appeals). (Page No. 22 being copy of application for mutation of 1, Jor Bagh property). Page Nos. 27 and 28 of the paper book, i.e., copy of the house-tax receipts and copy of the affidavit of the executor placed according to the learned D.R., had not been filed before the Assessing Officer and were filed before the CIT (Appeals) for the first time. Apart from pleading prompt action against the firm for giving a wrong certificate, the learned D.R. contended that the evidence placed at page 22 of the paper book is incomplete in so far as the affidavits attached to the application have not been filed perhaps deliberately before the Tribunal. The learned D.R. sought the permission of the Bench to file these affidavits which, according to her, should be sufficient to reject the claim of the assessee about the non-distribution of the property as in the affidavits Mrs. V.K.S. Bawa, i.e., the assessee has herself stated on oath that her husband was the co-owner of the property No. 1 /172 Jor Bagh, New Delhi. (Shri S.L. Bawa the husband of the assessee is also one of the legatees as per the will of Smt. Shanti Devi Puri). The daughter of Shri S.L. Bawa has also deposed in a separate affidavit that Shri S.L. Bawa was the co-owner of the property No. 1/172, Jor Bagh, New Delhi. The learned D.R. further contended that the administration of the will had been completed by the executor and there was nothing left to be done as per the will of the deceased. The legatees had become the owners of the property after the administration of the will had been completed. In this connection, she invited our attention to the conduct of the assessee as also the conduct of the executor. Mrs. Pandey contended that the administrator/executor had filed the return of income as an executor for assessment year 1985-86 only. In the subsequent assessment years, the co-owners have disclosed the rental income separately in their individual returns. Assessee herself has disclosed the 1 /4th share in the Jor Bagh property as the property belonging to her in the wealth-tax returns filed for the respective assessment years. The claim that the property had not been distributed amongst the legatees was made only when assessee was confronted that the benefit of Section 54F could not be given to her in view of the house being owned by her. This claim according to the learned D.R., is after-thought and not acceptable. Our attention was drawn to the provisions of Indian Succession Act, 1925 in support of the contention that the property vests with the executors only till the administration of the will is completed and once the administration of the property is completed, the ownership relates back to the date of the death of the deceased. According to the learned D.R. after the administration of the will is complete, the executors would hold the property as trustee of the beneficiaries/legatees. Referring to the decision of the Delhi High Court in the case of Sushil Ansal (supra), the learned D.R. contended that in that case it was found by the Hon'ble High Court that registration of the immovable property had not been effected since registration of immovable property is compulsory, the title could not be perfected without effecting such registration. However, according to the learned D.R., in the case of will there is no requirement of transferring the property by any registered document after the will is probated and the administration of the same is completed. Referring to the decision of the Calcutta High Court in the case of I.M. Thapar, Executor to the Estate of Late Lala Karam Chand Thapar (supra), the learned D.R. contended that assessment is to be made in the case of executors until the administration of the estate is complete. However, in this case, the administration of the estate having been completed, the assessment in the case of executors was not to be made. The learned D.R. further contended that the decision of the Andhra Pradesh High Court in the case of S.M. Bhandari (supra) was inapplicable to the facts of this case as there was no residuary legacy in this case. Referring to Section 211 of the Indian Succession Act, 1925, the learned D.R. contended that the property covered by a will vests with the executor or the administrator, as the legal representative of the deceased person till the property is distributed amongst the legatees. Reference was also made to Sections 119,327,332,333,336 & 337 of the Indian Succession Act in support of the contention that the executor/administrator is bound to deliver the legacy as soon as it is practicable. The executor may not be bound to pay to any legacy until the expiration of one year from the testator's death. However, after the expiration of one year, the executor cannot withhold the execution of the property. According to the learned D.R. the facts and circumstances of this case clearly suggest that the executor(s) had distributed the property amongst the legatees within a reasonable time and that the L & DO authorities had been requested to effect mutation after the death of Shri S.L. Bawa so that his share could also be mutated in the name of his legal heirs. It was accordingly contended that the appeals of the assesses may be dismissed.
7. We have given our careful consideration to the rival contentions. The issue for our consideration relates to Section 54F. It will, therefore, be useful to reproduce the said section:
54F. Subject to the provisions of Sub-section (4), where, in the case of an assessee being an individual or a Hindu Undivided family, the capital gain arises from the transfer of any long term capital asset, not being a residential house (hereinafter in this section referred to as the original asset), and the assessee has, within a period of one year before or two years after the date on which the transfer took place purchased or has within ,a period of three years after that date constructed a residential house (hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say, -
(a) if the cost of the new asset is not less than the net consideration in respect of the original asset the whole of such capital gain shall not be charged under Section 45;
(b) if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under Section 45.
Provided that nothing contained in this sub-section shall apply where the assessee owns on the date of the transfer of the original asset, or purchases within the period of one year after such date or constructs, within the period of three years after such date, any residential house, the income from which is chargeable under the head 'Income from House Property', other than the new asset.
8. It is evident from the section quoted above that the benefit in respect of the capital gains derived from the sale of assets other than residential house property is available subject to investment being made on the purchase or construction of a residential house property and subject to the condition that he is or does not within specified period become owner of another residential house property, the income wherefrom is assessable to tax under the head 'Income from House Property'. The benefit of Section 54F has been denied to the assessee by holding that she was the owner of 1 /4th share of the residential property situated at 1, Jor Bagh, New Delhi. The proposition of law that once she is the owner of the property, the benefit under Section 54F would not be available to the assessee, is riot disputed. What is disputed is the ownership of the property which shall hereinafter be referred to as 'Jor Bagh Property'. In this connection, it is necessary for us to refer to the will executed by Mrs. S.D. Puri, the mother of the assessee in the year 1978 which was duly registered. The testator, namely, Mrs. S.D. Puri died in the year 1984. Probate of the will was granted by District Judge, Delhi under Section 2 89 of the Indian Succession Act XXXIX of 1925 in case No. 23/85 vide order dated 7-8-1987. Shri V.P. Puri and Shri S.L. Bawa had been appointed as executors in the said will and the District and Session Judge directed them to administer the property and to make full and true inventory of the said property and credits, execute the same within six months and to render true accounts of the said property and credits within one year or within such further time as the court would appoint. The schedule of the property that was bequeathed by Smt. S.D. Puri is as under :
Rs.
1. Property bearing House No. 1, Jor Bagh, 5,00,000.00 New Delhi.
2. Property bearing House No. 16-A/8, WEA Karol Bagh, New Delhi (self-occupied) 62,422.56
3. Loans and advances
(i) D.D. Puri 8,000.00
(ii) Miss Usmeni Bawa 5,000.00
4. Meter security 1,900.00
5. Jewellery 42,479.00
6. Bank deposits plus interest upto 60,000.00 30-11-1984 3,801.44
7. Saving fund account with Central Bank 3,491.00 of India Interest upto 30-11-1984
8. Air condition, Jor Bagh 431.00
9. Furniture, Jor Bagh 5,000.00
10. Cash in hand 5,475.00
------------
6,98,000.00
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As per the will, the executors had been directed to distribute the property as under:
(i) House No. 16A/8, Karol Bagh to be distributed amongst Mrs. V.K.S. Bawa and her husband Mr. S.L. Bawa in equal shares. The furniture was to be given to Mrs. Ved Kumari Bawa. The rest of the immovable property was directed to be distributed in four equal shares amongst the following persons :
Mrs. V.K.S. Bawa daughter of the deceased Mr. S.L. Bawa Son-in-law Mr. V.P. Puri Nephew Mrs. Nirmala Puri Wife of the nephew
The testator had also directed the executors to do the following and if necessary to sell the property under their possession-
(a) An amount of Rs. 20,000 each be paid to my grand daughters Miss Rashmi Bawa and Miss Ushmi Bawa, daughters of my daughter Mrs. Ved Kumar Bawa on the occasion of their wedding. If they do not marry till the age of 25 years, then this amount of Rs. 20,000 may be given to them.
(b) To give the following on the occasion of their marriage, diamond sets worth Rs. 5,000 provided they marry according to Hindu customs :-
(i) Miss Rashmi d/o Mrs. Ved Kumari Bawa Rs. 5,000 (ii) Miss Ushmi d/o Mrs. Ved Kumari Bawa Rs. 5,000 (iii) Mr. Ashman s/o Shri Brahm Prakash Puri Rs. 5,000
(c) I also direct my Executors that amount of Rs. 5,000 may be given to Mrs. Savitri Chadha. A further amount of Rs. 15,000 may be retained by the executors to be utilised for the welfare of the widows of the Puri family and poor children.
Clause 5 of the will provides that in case the executors do not have sufficient wealth then they might even reduce or to alter the distribution directed in clause 4. In clause 6 a sum of Rs. 10,000 each was directed to be paid to Shri Brahm Prakasfy Puri and Shri Cyan Prakash Puri. In clause 8 of the will provides that in case after making the distribution of wealth any amount is left then a sum of Rs. 25,000 be utilised to form a trust for the welfare or upkeep of orphans and poor widows.
9. It is not disputed that effect to the contents of will was given in letter and spirit but for distribution of Jor Bagh property. The claim of the assessee is that the Jor Bagh property could not be distributed amongst the four persons referred to in clause 3(b) of the will as the land underneath an appertenant to the said building was leasehold land and the L & DO authorities had demanded 50 per cent of unearned increase before the mutation of the property could be effected.
10. We have, therefore, to ascertain as to whether there is merit in the findings of the Assessing Officer or is there any merit in the contentions raised on behalf of the assessee. In order to decide this issue, we consider it necessary to refer to the provisions of the Indian Succession Act XXXIX of 1925. Section 2(c) of the Indian Succession Act defines 'executor' to mean a person to whom the execution of the last will of the deceased person is, by testator's appointment confided.
11. In this case two persons had been appointed as executors, namely, Shri S.L. Bawa and Shri V.P. Puri. Shri S.L. Bawa had died on 14-9-1988. No other person was appointed as an executor in place of the deceased, namely Shri S.L. Bawa. Therefore, by virtue of Section 312 of the Indian Succession Act, 1925, Shri V.P. Puri become the sole executor.
12. Probate under Section 2(f) of the Indian Succession Act is defined to mean copy of a will certified under the seal of a Court or competent jurisdiction with the grant of administration to the estate of the testator. Clause 2(h) of the Indian Succession Act, 1925 defines 'will' to mean the legal declaration of the intention of a testator with respect to his property which he desires to be carried into effect after his death.
13. Ordinarily, the property owned by any person passes by survivorship. A Hindu is entitled to make a declaration in respect of his property which he desires to be carried into effect after his death. The said declaration is known as will. When a probate is obtained from the Court it establishes its existence. Executors are either appointed by the testators or by the Court. Section 213 of the Indian Succession Act, 1925 provides that no right as executor or legatee can be established in any Court of justice unless a court of competent jurisdiction in India has granted probate of will under which the right is claimed or has granted letters of administration with the will or with a, copy of the authenticated copy of the will annexed.
14. The executor is personification of the deceased. An executor holds the estate as representative of the deceased and not on behalf of any beneficiaries. Chapter VII of the Indian Succession Act, 1925 defines the duties of the executors. These are, inter alia, to pay the funeral expenses, the expenses for obtaining the probate to pay the specific legacies and to pay the debts of the deceased and to administer the estate in accordance with the directions of the testator. When all this has been done, the balance left in the executor's hands the residue and has got to be paid to the residuary legatee under Section 366 of the Indian Succession Act, 1925 or held in trust from that if the direction in the will required the residue to be held.
15. Chapter VIII of the Indian Succession Act, 1925 enunciates the time when the legatee's title become complete. Section 332 requires the assent of the executor or the administrator to complete the legatee's title in each case. Section 333 provides that an assent to a specific bequest will divest the executor or administrator of his interest in the subject-matter of the bequest and transfer the subject-matter to the legatee. Section 336 provides that an assent of the executor or the administrator gives effect to the legacy as from the date of the death of the testator. From the aforementioned provisions of the Indian Succession Act, 1925 it is clear that the executor cannot be regarded as a trustee for any legatee or beneficiary till he assents to the legacy. Whether the executor or the administrator has given the assent to the legacy is a question of fact to be determined on the facts and circumstances of each case. The assent of the executor/ administrator to the legacy may be express or implied from his conduct.
16. Though no time limit is fixed by Section 211 for the duration of the office of the executor with its powers and rights, the property which he has in the estate that devolves upon him and upon which his powers extend does not remain his indefinitely. By his assent to disposition in the will they become operative, the executor is pro tanto divested of the property i.e. the subject-matter of the bequest. As already mentioned under Sections 332 and 333 of the Indian Succession Act, 1925, the assent of the executor to legacy may be express or implied from his conduct. By assent is meant that the executors concur in disposition in the will. Once he assents to the disposition it takes effect upon the expecific 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 administration, we are fortified in our view by the decision of the Supreme Court in the case of Navnit LalSakarlal (supra) where at page 26 their Lordships held that the assent of the executor may be express or implied by his conduct and on the assent of the executor the title of the legatees becomes absolute. Their Lordships in the aforementioned case have also held that the question in each case to be examined is as to whether the administration has reached a point on which you can infer that the administration has been completed and residuary estate has been ascertained.
17. In the present case, it has accordingly to be ascertained as to whether the administration of the estate had been completed by the executors and as to whether the assent had" been given by the executors and as to whether the legatees have become the owners of the bequest property.
18. We have elsewhere mentioned in this order that every thing required for distribution of assets had been done by the executor(s). The claim of the assessee that the property had not been distributed amongst the legatees and that the rent was being collected by the executors is contrary to facts on record. As already pointed out, the testator had appointed two executors, one of whom namely Shri V.K.S. Bawa had expired in the year 1988. There was thus only one surviving executor namely Shri V.P. Puri. This has also been admitted by the assessee in the statement of facts filed before the CIT (Appeals) in para 6 where it has been stated as under :
In 1989 Mr. S.L. Bawa, one of the joint executors expired and Shri V.P. Puri became the sole executor of the said estate. He administers the property, collects the rent, pays the taxes and after meeting sundry expenditure on the estate, distributes residue amongst the remaining legatees.
Though assessee had claimed that rent was being collected by the sole executor as the administrator of the estate and not as the co-owner or trustee of the legatees. The same is negatived by the fact that the rent is being collected in the joint names of Shri V.P. Puri and Smt. V.K.S. Bawa. As already pointed out, Smt. V.K.S. Bawa is not the executor/administrator of the estate. M/s Asea Brown Bowerry Ltd. the tenants of Jor Bagh property have also certified that the rental cheques are being drawn in the joint names of Shri V.P. Puri and Smt. V.K.S. Bawa. Thus it is evident that the rent was not being collected by Shri V.P. Puri as administrator of the estate but. as co-owner of the Jor Bagh property.
19. Another factor in this regard is the application dated 4-7-1991 filed by Shri V.P. Puri before the Land and Development Officer for mutation of the Jor Bagh property. This application is placed at page 22 of the paper book. We have elsewhere mentioned in this order that the counsel for the assessee had wrongly certified that the said application had been filed before the revenue authorities. However, since this application is relevant for determination of the issue before us, we have admitted not only this application which was filed by the assessee along with the paper book but also the annexures to this application in the form of affidavits filed before us by the Departmental Representative. This evidence is admitted on behalf of the revenue as the assessee furnished the aforementioned document without seeking our permission in accordance with Rule 29 of the Income-tax Appellate Tribunal Rules. Moreover, a wrong certificate was given on the paper book. More important the relevant annexure to the application in the form of affidavits of the assessee and her daughter, which are material in the determination of the issue in hand, had not been filed by the assessee. The copies of the affidavits were filed by the revenue. Shri Sayali having apologized for this serious lapse, we presently leave it at that. We may refer to the affidavits attached to the application filed by Shri V.P. Puri, referred to above, before the L & DO authorities. An affidavit of Mrs. V.K. Bawa i.e. the assessee is dated 11-6-1991. In the affidavit following averments are noteworthy :
1. That Shri S.L. Bawa was my husband and he died on 14-9-1988 at London.
2. That the deceased was co-owner of property Block No. 1/172, Jor Bagh Nursery, New Delhi.
3. The deceased has left behind following heirs...
5. That the deceased has left no will.
20. In a separate affidavit Mrs. Rashmi Kaura, the daughter of Shri S.L. Bawa has also made a declaration that Sh. S.L. Bawa who died on 14-9-1988 at London was the co-owner of the property at 1/172, Jor Bagh Nursery, New Delhi. When assessee has filed the income-tax returns claiming herself to be the legal owner of l/4th share of residential property at Jor Bagh, when she has stated on oath that her husband, who is one of the legatees as per the will of Mrs. S.D. Puri was the owner of 1 /4th share of Jor Bagh property at the time of his death on 14-9-1988, when everything that was required to be done under the will had been completed, could it be said that the distribution of the property as per the will had not been completed. Apart from the fact that L & DO had demanded a sum of Rs. 60 lakhs for effecting mutation in the name of persons, who were not in the direct line of succession of the deceased other than the assessees even the assessee does not claim that anything else had remained to be done for distributing the property covered under the will. As already mentioned elsewhere in this order the demand of Rs. 60 lakhs from L & DO authorities is not sufficient to hold that the administration of the property had not been completed.
21. The decisions relied upon on behalf of the assessee are inapplicable to the facts of this case. In the case of Administrator General of West Bengal v. CIT [1965] 56 ITR 34 (SC), their Lordships of the Supreme Court held that till the administration of the estate was complete the income would not be assessable on behalf of the sons who were residuary beneficiaries and that Section 41 of the Indian Income-tax Act, 1922 did not apply. In this very case their Lordships held that when the personal estate of the testator has been fully administered by his executor and residue ascertained, the residue legatee is entitled to have the residue as so ascertained, with any agreed income, transferred to him but until that time he has no property in any specific investments forming part of the estate or in the income from any such investment, and both corpus and income or the property of the executors and are applicable by them as a mixed fund for the purposes of administration.
22. However, in the present case, the assessee is a specific legatee in respect of the immovable properties. We have found as a matter of fact that the properties in question had been distributed amongst the legatees. In view of these facts the decision of the Hon'ble Supreme Court in Administrator General of West Bengal's case (supra) does not help the assessee in any manner. If the property had not been distributed amongst the legatees and the administration of the estate would not have been completed then provisions of Section 168 of the Income-tax Act, 1961 would be applicable and the assessment was to be completed in the name of the executors in respect of the entire income of the estate.
23. In the case of Navnit Lal Sakarlal (supra), their Lordships of the Supreme Court held that under Section 168(3) of the Income-tax Act, 1961, executor will continue to be assessed unless the estate is distributed amongst the beneficiaries according to their several interests. In that case, the claim of the assessee that the administration of the estate had not been completed was accepted by their Lordships of the Supreme Court. At page 23 of the report it was observed by their Lordships "There is nothing in the statement of facts or in the orders of the authorities to indicate 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 Darnodardas died on 31 -12-1957 and the assessment of the estate duty of the estate passing on his death was completed on 30-12-1961. There is nothing to indicate that assessment proceedings were in any way delayed by the executor or other legal representatives".
24. Their Lordships further held "Though a reference has been made to the estate duty liability being outstanding there is nothing to show that only thing that remained to be done was the payment of the estate duty and nothing else remained to be done. Their Lordships further held that the discharge of 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 cannot be said to be complete until the estate duty liability is properly provided for". Referring to the Estate Duty Act, their Lordships held "under the Estate Duty Act the executor is made as an accountable person who has to deliver account of the estate passing* on the death". Referring to the decision of the Hon'ble Supreme Court in the case of P. Leelavalhamma v. CED [1991] 188 ITR 803 their Lordships held that though estate duty is a charge on the immovable properties passing on the death nevertheless the executor has got duty and responsibilities as an accountable person to make satisfactory arrangements for the payment of the estate duty. Their Lordships accordingly held that the administration of the estate had not been completed and, therefore, provisions of Section 168(3) were applicable and assessment was to be made in the hands of the executors.
25. It becomes necessary for us to examine in the light of the aforementioned decision of the Supreme Court, as to whether the demand of Rs. 60 lakhs by Land and Development Office was the responsibility of the executors as part of the administration of the estate of the deceased. In this connection, we may derive some guidance from the decision in the case of CWT v. P.N. Sikand [1977] 107 ITR 922 (SC). In this case, their Lordships at page 927 posed a question for the purpose of being answered. We may quote the relevant portion from the decision :
The asset consists of leasehold interest of the assessee in the land together with the building constructed upon it. The building, of course, belongs to the assessee having been constructed by him and the determination of its value should not present any difficulty, because there are recognition of its value should not present any difficulty because there are recognised method of valuation of buildings. The difficulty, however, arises in regard to valuation of the leasehold interest in the land. The leasehold interest is held by the assessee under a lease deed executed by the President of India and, apart from Clause (13), which we have reproduced above, it is an ordinary lease deed of the usual kind. Clause (13) of the lease deed provides that the assessee shall not be entitled to assign the leasehold interest in the land without obtaining the prior approval in writing of the lessor and 50 per cent of the unearned increase in the value of the land at the time of the assignment shall be claimable by the lessor, and, moreover, if the lessor so desires, he shall have pre-emptive right to purchase the property after deducting 50 per cent of the unearned increase in the value of the land. Does this covenant merely impose a personal obligation on the lessee which arises on assignment of the leasehold interest or is it a covenant running with the Land ? That is a question which has a direct bearing on the valuation of the leasehold interest. Now, the last portion of the first paragraph of clause provides that all such assignees and transferees shall be bound by all the covenants and conditions herein contained and be answerable in respect therefor. This means that whenever an assignment of the leasehold interest is made by the lessee, the assignee would be bound by all the covenants contained in the lease deed and these would indisputably include the covenant in Clause (13). Clause (13) would equally bind the assignee and if the assignee in his turn wants to assign his leasehold interest in the land, he would have to obtain the prior approval in writing of the lessor to such assignment and the lessor would be entitled to claim 50 per cent of the unearned increase in the value of the land. This indeed was not disputed on behalf of the revenue. The covenant in Clause (13) is, therefore, clearly a covenant running with the land and it would bind whosoever is the holder of the leasehold interest for the time being. It is a constituent part of the rights and liabilities and advantages and disadvantages which go to make up the leasehold interest and it is an incident which is in the nature of burden on the leasehold interest.
26. As held by their Lordships of the Supreme Court the covenant in clause 13 of the lease deed agreement is clearly running with the land and it would bind whosever is the holder of the leasehold interest for the time being. As per the letter of the Settlement Commissioner of the L & DO dated 19-6-1992 the Department had no objection for mutating the property in the name of the beneficiaries of Smt. S.D. Puri, subject to demand of 50 per cent unearned increase in respect of the property bequeath in favour of Shri S.L. Bawa, Shri V.P. Puri and Smt. Nirmala Puri. As far as the assessee is concerned, the Department had clearly admitted that she was in the direct line of succession of the testator and, therefore, there was no demand of unearned increase in respect of the portion given to her. The relevant portion from the letter dated 19-6-1992 of L & DO authorities placed at page 23 of the Paper Book is quoted hereunder:-
I am to inform you that S/Sh. S.L. Bawa and V.P. Puri and Mrs. Nirmala Puri the beneficiaries of the Will of the deceased lessee Smt. Shanti Devi Puri are not in the direct line of succession. Therefore, their share in the property which will go to them as per Will has been taken as a transfer. Since it is taken as a transfer, the unearned increase for such transfers is recoverable under clauses 2 and 13 of the lease deed. The lessor will be pleased to mutate the property in favour of the beneficiaries of the Will of the deceased lessee Smt. Shanti Devi Puri provided the following terms and conditions are complied with in full in advance....
27. It is evident from the above-quoted letter that even the L & DO authorities have taken the distribution of the property amongst the legatees as a transfer. The only condition enforced by them was the payment of unearned increase for the mutation in their favour. As already pointed out, there was no demand, in respect of share of property handed over to the assessee, from the "L & DO authorities. Moreover, it is noteworthy that the probate of the Will had been obtained somewhere in the year 1987. There is no explanation on behalf of the assessee as to why no action had been taken by the executors for mutation of the property till 4-7-1991 when it is claimed that mutation of the property was essential for completion of distribution of the property. From the application filed before the L & DO authorities along with the affidavits, it is evident that the assessee as well as the other legatees including the executor had not been aware of the possibility of the L & DO authorities treating the bequeath as a transfer in favour of the persons who do not fall under the direct line of succession.
28. As is clear from the facts on record, the unearned increase was not payable by the executor but by the legatees other than the assessee for the purposes of mutation in their favour. The mutation in the L & DO records serves as an evidence of ownership in respect of immovable property. The property in the legatees vests as soon as the assent of the executor is granted. The title of the legatees is complete and it relates back from the date of the death of the testator. The mutation in L & DO records would make the title absolute and unquestionable. In this connection, it would be relevant once again even at the cost of repetition to refer to the provisions of Indian Succession Act, 1925.
29. Under Section 333 of the Indian Succession Act, 1925 the assent of the executor or administrator of a specific bequest is sufficient to divest his interest as executor Or administrator therein and to transfer the subject of the bequest of the legatee, unless the nature of the circumstances of the property required that it shall be transferred in a particular way.
30. Sub-section (2) of Section 333 provides that assent may be verbal and it may be either express or implied from the conduct of the executor or administrator.
31. In the light of aforementioned provision of the Indian Succession Act, 1925 the contention raised on behalf of the assessee that mutation in the L & DO records was necessary for the assessee for becoming owner of the property is bereft of reason and substance. The decision in the case of Bakshi Sampuran Singh (supra) relied upon by the assessee in this regard has been quoted out of context. The issue before their Lordships was not as to whether mutation of the property is necessary for becoming dejure owner of the property. As held by their Lordships of the Supreme Court in the case of CIT v. Sun Engg. Works (P.) Ltd. [1992] 198 ITR 297, observations of the Court in a decision must be understood in the light of question before the Court and the same must not be divorced from context.
32. We accordingly reject the contention raised on behalf of the assessee that the mutation in the L & DO records was essential before the assessee could become owner of the property.
33. Considering the totality of facts and circumstances of this case, we are of the view that the distribution of the Jor Bagh property had been completed by the executors before the end of the previous year 1991 -92 and that from the conduct of the executor as well as that of the legatees it is clear that the assent for the transfer of the properties had been granted by the executor so as to confer the legal title -of the properties to the legatees. That being so, assessee was the owner of the property situated at 1, Jor Bagh, New Delhi, when assessee purchased the property at New Friends Colony jointly with her daughter. Thus the assessee was not entitled to relief under Section 54 of the Income-tax Act, 1961.
34. Before we wind up, we would like to point out that the decisions relied upon by the learned counsel for the assessee which have not been referred to by us in the operative portion of the order are not relevant and accordingly inapplicable. Though we may not make specific mention of all such cases, we would like to refer to the decision of Karnataka High Court in the case of R.G. Mundkar (supra). This decision relates to the valuation of assets under the provision of the Wealth-tax Act. Without going to the facts of the case, it is sufficient to say that in the case of the assessee, there was no demand of unearned increase by the L & DO authorities as she was in the direct line of succession of the deceased, namely Smt. Shanti Devi Puri.
35. The decision of Delhi High Court in the case of Sushil Ansal(supra) is also inapplicable to the facts of this case. This decision was relating to the transfer of property by sale and their Lordships of the Delhi High Court held that without the registration of the conveyance deed, the assessee could not be held to be the owner of the property within the meaning of Section 22 of the Income-tax Act, 1961. In the present case the property has been bequeathed by declaration of Will. It takes effect in accordance with the provisions of the Indian Succession Act, 1925. The aforementioned decision is accordingly inapplicable to the facts of this case.
36. The contention raised on behalf of the assessee that the matter should be referred back to the CIT (Appeals) for considering as to whether there was deemed distribution of estates, is also devoid of any merit. The assessee had the opportunity before the Assessing Officer who has dealt with this issue and the matter had been taken by the assessee before the first Appellate Authority and we have also given the assessee full opportunity of being heard. We, therefore, reject the plea of the assessee for sending this issue back to the file of the CIT (Appeals).
37. In the result, appeals of the assessee are dismissed.