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Tax responsibilities of legal heirs

QUESTION: My father who has two assessments, one as HUF and the other as individual, passed away in November 2003. I would like to know, what are my responsibilities as son and the present karta of the HUF, both in matters of succession and tax obligations. How do I close the income-tax files on his death? My mother is either a nominee or the joint owner of his assets, though disclosed in his personal file as his own. Should the income in such cases be offered in my mother's case or in the case of the legal heirs being my mother, myself, my brother and sister? If we choose to sell the property, who has to offer tax on such amount?

ANSWER: In respect of the deceased, an assessment has to be made on his income till date of his death under Sec. 159 by the legal representative filing the return on the income on which the deceased "would have been liable to pay if he had not died, in the like manner and to the same extent as the deceased". Advance tax payment, if any, filing of return and payment of self-assessment tax are the requirements of the legal representative, which in this case is the eldest son. The law provides that all the legal representatives would be personally liable to the extent of assets to which they come into possession, because there is an automatic charge on such property left by the deceased. This position of law relates only to his individual income.

As far as the income of the Hindu Undivided Family (HUF) is concerned, it is an entity which continues with only the change in karta. The income of the entire year would be offered by the reader as the new karta in due course fulfilling all the obligations expected of the HUF, the death making no difference whatsoever.

In respect of the deposits held jointly or now received as nominee, where it is clear, it is that of the deceased in his individual capacity (and not that of the HUF), liability for income tax on income from them depends upon the fact, whether the deceased had left a Will or died intestate. If he had left a Will, it will devolve as per terms of the Will. Where the joint owner or nominee is the wife, her name could have been included for the sake of convenience, so that unless the joint ownership was intended at the time of deposit otherwise, it can only be treated as part of the estate left by the deceased, the intention of joint ownership being a matter of evidence. Benami Transactions (Prohibition) Act, 1988, permits benami ownership of wife or a daughter. It is true that Sec. 3 of that Act raises a presumption of advancement, but it is doubtful when it could apply to joint deposit, while it will certainly apply, if the deposit were solely in the name of the wife. It is only a Will, which puts such matters beyond doubt, and should, therefore, be considered necessary for any person, who has properties to leave a will to avoid any doubt or misgivings on the part of legal heirs in respect of such assets.

In respect of assets declared by the deceased as the karta of the Hindu joint family in the return of the joint family, the fact that the property stands in the name of any member of the family, either alone or jointly or whether such member is shown only as a nominee, it should make no difference, because it should be treated as continuing to belong to the joint family.

In intestate succession, the property gets vested in the legal heirs immediately on the death of the deceased in respect of individual property. Where the deceased dies leaving a will, the succession follows the will. A Hindu Will is required to be probated, if there is immovable property in the city. It is the executor in either case, who takes charge and the beneficiary become assessable as and when the executor distributes the assets. Till such time of distribution, it is the executor who alone is liable as held in CIT v Mrs. A. Ghosh (1986) 159 ITR 124 (Cal), where the executor herself was the sole heir, but it was still found that a separate assessment was necessary till such time the execution proceedings are completed.

Since the property gets vested in intestate succession immediately on the death of the deceased in the proportion to which each legal heir is entitled, it is for such legal heirs to file respective return of his or her share of income arising after death. Liability for capital gains and wealth tax follows liability for income-tax.

S. Rajaratnam

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