Who will file the income tax return in case of Death of Person

Question : how will the residential status of a deceased  will be determined ?

 The following example will show the mode of determination of residential status of a deceased when the residential status is not determinable by resort to the general provisions of section 6 of the Act–

Example : Mr. I died on 1-5-2011. He had earned income of Rs. 4 lakh during April 2011 from a source outside India. Mr. I had never left India. Are the legal representatives of Mr. I liable to pay any tax in respect of Mr. I ?

Solution : If one goes by exact wordings of section 6, one would find that Mr. I has become non-resident for the previous year 2011-12, as his stay in India (in fact, his stay in the world) was less than 60 days as contemplated in second basic condition of section 6(1) of the Act.

But, one would argue, is such a determination logical? Going by logical reasoning and intent and purposes of the Act, Mr. I has to be held to be resident in India and, further so in view f section 159(1) of the Act, which provides that – “Where a person dies, his legal representative shall be liable to pay any sum 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.”

Had Mr. I not died, he would have been liable to tax in respect of his income of Rs. 4 lakh. Accordingly, the said income will be chargeable to tax in the hands of the legal representative

The Supreme Court in CIT v. Hukumchand Mohanlal [1971] 82 ITR 624, held that section 159(1) extends fictionally the legal personality of a deceased person only for the duration of the previous year in the course of which he died and, therefore, in case deceased followed cash system of accounting, the income received either by him before his death or by his heirs and representatives after his death in that previous year alone would be assessable to tax in the relevant assessment year, but not the income received in any year subsequent to that previous or accounting year. Since no assessment can be made on a deceased, except as provided in section 159, there can’t be any assessment of the deceased person for the years subsequent to year of his death.

[Opinion Note : In certain cases, determination of residential status of the deceased may become difficult when deceased used to reside in India as well as abroad. Though the number of such cases would be less, yet in those cases the guiding factor may be the ratio of number of days in which the deceased resided in India as well as abroad during the previous year in which his death took place. If deceased was a foreign resident, but died in India while his stay in India (which is less than 182 days), he would be held to be non-resident only. However, if, in case of Indian resident, he went outside India and died there and he didn’t remain in India even for a single day (for instance, an old man visits a place abroad in the month of March, 2011 for two months and dies in April, 2011 while he is outside India), then also, he would be held to be resident in India. In fact, the agreements for avoidance of double taxation with the various agreements also guide in the matter of determination of residential status, which may be referred to in those cases.]

Question What will happen to the Income earned after the date of Death of the deceased ?