Treatment of Income on death of assessee in proprietorship


(Querist) 03 September 2008

I want to know, when an assessee dies & the assets & liabilities are taken over by his wife, what is the treatment of income in the books of assessee (till the death of assessee) & income accrued after death of assessee taken over by his wife. Do two seperate books are required to be maintained & two seperate income tax return shall be filed for the two period i.e. Opening of FY to the death of assessee. & second from the death of assee to the of F.Y.

Pl help me

Jitender (Expert) 03 September 2008

yes ,two returns are required to be filed.

CA.Tarun Maheshwari (Expert) 03 September 2008

Dear Preeti. I am also handling a similar case now a days. But I have shown the proprietorship business as succeded to Wife, and i am going to file a single return of income in the name of Wife, as i have shown that the profit earned by the husband is transferred to the Wife. But I have not yet got any satisfactory solution of this problem. There may be diffrence of opinion on solution of this problem.

S.Srinivasaraghavan (Expert) 04 September 2008

Upto the death of partner a return has to be filed by the successor to the estate of the deceased in representative capacity. The tax liability will be met by the estate of the deceased.

CA RAMESH KUMAR AHUJA (Expert) 04 September 2008

The return for income upto the date of death of the deceased will be filed by the legal representative. Refer section 159 of IT Act.

Thereafter, the income earned on the Estate of the deceased but not distributed by the execution of the will of the deceased shall be taxable in the hands of the executor as an individual, if there is one executor and as AOP, if more than one executor. Refer section 168 dealing with the income from the estate of the deceased.

Preeti Agarwal (Querist) 04 September 2008

Ok i agree that two returns may be filed. But when TDS has already been deducted and on closing the books on the date of death of assessee the tax liability is less than the Tax Deducted. HOw it would be claimed for refund. In future if the refund comes in name of "Deceased Assessee" whose books has already been closed where should the same be deposited.

Also one thing more, when the wife would take over assets & liabilities of the deceseased assessee, do the profit earned during the period from begining of FY to the date of death of assessee will form part of taxable income of the wife also.

Please guide me.

CA RAMESH KUMAR AHUJA (Expert) 05 September 2008

No, TDS will be claimed in the return of Estate of the Deceased till the assets are distributed and taken over by the legal heirs by the execution of a WILL or otherwise. Thereafter, the income will be taxed in the hands of respective legaal heir and TDS will also be claimed by that legal heir.
Also, the refund may be issued by the department in the name of legal representative or the legal heir whon is filing the return.

Preeti Agarwal (Querist) 05 September 2008

Thank you Sir.

Sir please also tell me the procedure how to claim refund of TDS in the name of legal hiers. Do a seperate return/application/form is required to fill. If yes pl tell the form no. also. & do the application will be filed with the return only or seperately.

Looking forward for your kind guidance.

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