A) ABSTRACT / HEADNOTE

This judgment elucidates the scope of income tax assessment under Section 24B of the Indian Income-tax Act, 1922, particularly concerning payments made by executors to the widow of the deceased as part of estate administration. The key question was whether such payments could be deducted from the taxable income of the estate in the hands of the executors. The Court upheld the Bombay High Court’s finding, ruling that such personal allowances or bequests are not deductible expenses, as they do not relate to the earning of income or business operations. The Court distinguished between legally enforceable business obligations and testamentary gifts or maintenance allowances, holding that the latter do not qualify as expenditure incurred wholly and exclusively for the purpose of business under Section 10(2)(xv). The ruling reaffirms a narrow interpretation of permissible deductions and clarifies the tax obligations of legal representatives administering an estate with ongoing business interests.

Keywords: Section 24B, Tax Deduction, Testamentary Bequest, Maintenance Allowance, Business Expenditure, Income-tax Assessment, Legal Representatives, Executor’s Tax Liability, Indian Income-tax Act 1922

B) CASE DETAILS

i) Judgement Cause Title:
Executors of the Estate of J.K. Dubash v. Commissioner of Income-tax, Bombay City

ii) Case Number:
Civil Appeal No. CV of 1949

iii) Judgement Date:
21st December, 1950

iv) Court:
Supreme Court of India

v) Quorum:
Kania C.J., Patanjali Sastri J., and Das J.

vi) Author:
Kania C.J.

vii) Citation:
[AIR 1951 SC 250], [1950] SCR 969

viii) Legal Provisions Involved:

• Section 24B of Indian Income-tax Act, 1922

• Section 10(2)(xv) of Indian Income-tax Act, 1922

ix) Judgments Overruled by the Case (if any):
None

x) Case is Related to which Law Subjects:
Taxation Law, Succession Law, Estate Law, Trusts and Wills, Probate Law

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

Upon the death of Mr. J.K. Dubash, his executors administered his estate, which included a business. While doing so, they paid an amount to the testator’s widow as per his will. The dispute arose on whether this payment could be treated as a deductible expense while computing the income of the estate under the Income-tax Act. The Income-tax Officer disallowed the deduction. The Income-tax Appellate Tribunal upheld the disallowance, and the matter came before the Bombay High Court via a reference under Section 66(1) of the Act. The High Court ruled that the amount was not deductible, and the executors appealed to the Supreme Court, though limited only to the issue of business succession. However, the judgment records the Court’s position on this secondary question as well, which forms the subject of the current analysis.

D) FACTS OF THE CASE

Following the death of J.K. Dubash on April 9, 1942, his executors took charge of his estate. Clause 13 of the will allowed them to continue his business operations temporarily. During this time, they paid a certain sum to the widow, in line with the testamentary instructions. The executors claimed that the payment should be deducted from the taxable income of the estate as an allowable business expenditure under Section 10(2)(xv) or as an expense for estate administration under Section 24B. However, the tax authorities rejected this claim, stating that the payment was not related to business expenditure but rather a personal bequest or allowance, and hence, not deductible. The Appellate Tribunal and the Bombay High Court both confirmed this interpretation.

E) LEGAL ISSUES RAISED

i) Whether the payment made by the executors to the widow of the deceased testator is an allowable deduction under the Indian Income-tax Act, 1922, when computing income of the estate?

F) PETITIONER/ APPELLANT’S ARGUMENTS

i) The counsels for Petitioner / Appellant submitted that the amount paid to the widow was pursuant to the will and part of the duties of the executors in administering the estate. They argued that since the business formed part of the estate, and the executors were continuing the business under the will’s direction, all payments made under the will should be considered as legitimate outgoings. They relied on the broad language of Section 10(2)(xv) which allows deductions for any expenditure incurred wholly and exclusively for the purpose of business. They submitted that estate administration and compliance with the will’s directives should qualify under this standard. Further, under Section 24B, the executors stood in the shoes of the deceased and were responsible for all expenses necessary for maintaining the estate and the business[1].

G) RESPONDENT’S ARGUMENTS

i) The counsels for Respondent submitted that the payment to the widow was a testamentary bequest, not a business expense. They stressed that the Act permits deductions only for expenses incurred in earning income, not for distribution of income or personal obligations. Section 10(2)(xv) specifically refers to expenses that are business-related, and not related to gratuitous or obligatory distributions from profits. The widow had no claim arising from the business, nor was she an employee or creditor. The payment did not contribute to the earning of profits, and was not made under any commercial expediency. Thus, it could not be allowed as a deduction either under Section 10(2)(xv) or Section 24B, which only allows assessment of deceased’s income in hands of legal representatives, not expansion of deductibility[2].

H) RELATED LEGAL PROVISIONS

i) Indian Income-tax Act, 1922:

• Section 24B – Makes legal representatives liable to pay tax from estate income of the deceased.

• Section 10(2)(xv) – Allows deduction for expenses “wholly and exclusively” incurred for business.

I) JUDGEMENT

a. RATIO DECIDENDI

i) The Court held that the payment to the widow was not a business expenditure and could not be deducted from income under the Income-tax Act. It was a voluntary or testamentary obligation, not incurred in the course of business. The executors may be bound under the will to make such payments, but that does not transform them into business-related outgoings. Thus, Section 10(2)(xv) could not be invoked, as the condition of expenditure being incurred “wholly and exclusively for business” was not satisfied. The Court refused to entertain arguments beyond the scope of allowable deductions under the Act.

b. OBITER DICTA 

i) The Court implied that where executors act in dual roles—as estate administrators and temporary business operators—the distinction between personal estate payments and business expenses must be carefully preserved. Compliance with testamentary wishes does not qualify expenses for tax relief unless they satisfy strict statutory criteria.

c. GUIDELINES 

• Payments made from estate income to beneficiaries or widows under a will are not deductible under Section 10(2)(xv).

• Only expenses incurred in earning income or running the business can be allowed.

• Section 24B imposes liability to pay tax, but does not expand what can be deducted.

• Executors must separate personal bequests from business expenditures in accounting.

J) CONCLUSION & COMMENTS

The Court delivered a strong message on the narrow interpretation of tax deductions, disallowing any blending of testamentary obligations with business liabilities. Executors cannot shield estate income from tax by labeling all estate outgoings as expenses, particularly when they relate to personal or familial obligations. This reinforces judicial consistency in interpreting Section 10(2)(xv) and ensures that income tax liability is not diluted through non-business payments. The case also acts as a guiding precedent on how legal representatives and executors must treat estate expenditures when computing taxable income.

K) REFERENCES

a. Important Cases Referred

i) Jupudi Kesava Rao v. Commissioner of Income-tax, Madras, ILR (1946) 59 Mad 377
ii) Commissioner of Income-tax, Bombay v. P.E. Polson, LR 72 IA 196
iii) Williams v. Singer & Others, [1921] 1 AC 65

b. Important Statutes Referred

i) Indian Income-tax Act, 1922, Sections 10(2)(xv), 24B