CHAPTER XVII SPECIAL PROVISIONS RELATING TO CERTAIN PERSONS A.—Association of persons, firm, Hindu undivided family, etc. 1.—Legal representatives

Legal representative.

302(1)

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.

302(2)

For the purposes of making an assessment (including an assessment, reassessment or recomputation under section 279) of the income of the deceased and for the purpose of levying any sum in the hands of the legal representative as per the provisions of sub-section (1), any proceeding––

• (a) taken against the deceased before his death shall be deemed to have been taken against the legal representative and may be continued against the legal representative from the stage at which it stood on the date of the death of the deceased;
• (b) which could have been taken against the deceased if he had survived, may be taken against the legal representative; and
• (c) all the provisions of this Act shall apply accordingly.

302(3)

The legal representative of the deceased shall be deemed to be an assessee for the purposes of this Act.

302(4)

Subject to the provisions of sub-sections (5), (6) and (7), the liability of a legal representative referred to in sub-section (1) shall be limited to the extent to which the estate of the deceased is capable of meeting the liability.

302(5)

Every legal representative shall be personally liable for any sum payable by him in his capacity as legal representative if, while such liability remains undischarged, he creates a charge on or disposes of or parts with any assets of the estate of the deceased, which are in, or may come into, his possession.

302(6)

The liability of a legal representative referred to in sub-section (5) shall be limited to the value of the asset so charged, disposed of or parted with.

302(7)

The provisions of sections 304(2) and (5) and 305, so far as may be and to the extent to which they are not inconsistent with the provisions of this section, apply in relation to a legal representative.

Explanation

Section Summary:

Section 302 of the Income Tax Act deals with the liability of legal representatives for the tax obligations of a deceased person. It ensures that the tax liabilities of the deceased are transferred to their legal representatives, who are responsible for settling these obligations using the deceased's estate. This section also outlines the extent of the legal representative's liability and the conditions under which they may be personally liable.

Key Changes:

1. Continuity of Proceedings: Legal proceedings initiated against the deceased before their death can continue against the legal representative from the stage at which they were left.
2. Limited Liability: The legal representative's liability is limited to the extent of the deceased's estate. However, personal liability arises if the legal representative disposes of or charges the estate's assets while the tax liability remains unpaid.
3. Deemed Assessee: The legal representative is treated as an assessee under the Income Tax Act, meaning they are subject to the same obligations and procedures as the deceased would have been.

Practical Implications:

• For Legal Representatives: They must ensure that the deceased's tax liabilities are settled using the estate's assets. If they dispose of or charge any assets before clearing the tax dues, they may become personally liable for the tax amount up to the value of the disposed or charged assets.
• For Tax Authorities: They can continue or initiate tax proceedings against the legal representative as if the deceased were still alive. This ensures that tax obligations are not evaded due to the death of the taxpayer.

Critical Concepts:

• Legal Representative: A person who legally represents the deceased, such as an executor, administrator, or heir.
• Estate: The total assets and liabilities left by the deceased.
• Limited Liability: The legal representative is only liable to the extent of the estate's value, except in cases where they dispose of or charge assets, in which case their liability extends to the value of those assets.

Compliance Steps:

1. Identify Tax Liabilities: Legal representatives must determine the deceased's outstanding tax liabilities.
2. Settle Liabilities: Use the estate's assets to pay any due taxes.
3. Avoid Disposal of Assets: Do not dispose of or charge any estate assets until all tax liabilities are cleared to avoid personal liability.
4. File Returns: If required, file income tax returns on behalf of the deceased for the relevant assessment years.

Examples:

• Scenario 1: Mr. A dies with an outstanding tax liability of ₹5 lakh. His legal representative, Mr. B, uses ₹5 lakh from Mr. A's estate to settle the tax dues. Mr. B has no further liability.
• Scenario 2: Mr. C dies with a tax liability of ₹10 lakh. His legal representative, Mr. D, sells a property worth ₹8 lakh from the estate before clearing the tax dues. Mr. D becomes personally liable for ₹8 lakh, the value of the disposed asset, in addition to the estate's liability.

This section ensures that tax obligations are not evaded due to the death of a taxpayer and provides clear guidelines for legal representatives to follow.