Executor Tax Recovery and Succession to Business or Profession Otherwise Than on Death
The Income-tax Act, 2025 reorganises the rules formerly contained in Sections 169 and 170 of the Income-tax Act, 1961. The executor provisions are now part of Section 312, while succession to a business or profession otherwise than on death is governed by Section 313.
Section 312 - Executor and right relating to tax paid
Section 312 governs taxation of the estate of a deceased person in the hands of the executor. An executor includes an administrator or another person administering the estate. The section also preserves the executor's statutory rights in relation to tax paid or payable in the representative capacity.
Purpose of the executor recovery rule
An executor who bears tax in the course of administering the estate acts in a representative capacity. The statutory framework therefore provides the corresponding right to recover or retain amounts in respect of tax properly paid or payable while administering the estate, subject to the provisions governing representative assessees.
Section 313 - Succession to business or profession otherwise than on death
Section 313 applies where a person carrying on a business or profession, called the predecessor, is succeeded by another person, called the successor, who continues to carry on that business or profession.
Assessment in the year of succession
- The predecessor is assessed on income of the tax year up to the date of succession.
- The successor is assessed on income of the tax year after the date of succession.
When the predecessor cannot be found
If the predecessor cannot be found, the successor may be assessed in respect of the predecessor's income for the tax year of succession up to the date of succession and for the preceding tax year, in the same manner and to the same extent as the assessment would have been made on the predecessor.
Pending assessment, reassessment or other proceedings
Section 313 also deals expressly with proceedings during a pending succession. Where the statutory conditions are met, an assessment, reassessment or other proceeding made or initiated on the predecessor during the pendency of the succession is deemed to have been made or initiated on the successor, and the Act applies accordingly.
Recovery from successor when predecessor's dues cannot be recovered
If an amount payable in respect of the predecessor's business or profession for the relevant period cannot be recovered from the predecessor, the Assessing Officer must record a finding to that effect. The amount then becomes payable by and recoverable from the successor. The successor is entitled to recover from the predecessor the amount so paid.
Succession to business of a Hindu undivided family
Where a business or profession carried on by a Hindu undivided family is succeeded to and there is simultaneously or subsequently a partition of the joint family property, tax due on the business or profession up to the date of succession is assessed and recovered in the manner prescribed for partition of a Hindu undivided family, without prejudice to Section 313.
Meaning of income for succession
For Section 313, "income" includes any gain accruing from transfer of the business or profession, in any manner, as a result of the succession. This ensures that gains arising from the transfer connected with the succession are included within the statutory succession framework.
Meaning of pendency
For the succession rule, "pendency" covers the statutory period beginning with the relevant application for succession before the High Court or tribunal, or admission of an application for corporate insolvency resolution by the Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016, and ending when the relevant order is received by the jurisdictional Principal Commissioner or Commissioner.
Former Section 169 of the Income-tax Act, 1961
Former Section 169 provided that the provisions governing the right of a representative assessee to recover tax paid applied, so far as possible, to an executor in respect of tax paid or payable by the executor. The provision operated together with the executor assessment rules in former Section 168.
Former Section 170 of the Income-tax Act, 1961
Former Section 170 allocated income between the predecessor and successor where a business or profession was succeeded to otherwise than on death. It also dealt with assessment where the predecessor could not be found, pending proceedings during succession, recovery of the predecessor's unpaid dues from the successor, succession involving an HUF partition and gains arising from transfer of the business or profession.
1961 Act and 2025 Act correspondence
| Subject | Income-tax Act, 1961 | Income-tax Act, 2025 |
|---|---|---|
| Executor and right concerning tax paid or payable | Sections 168 and 169 | Section 312 |
| Succession to business or profession otherwise than on death | Section 170 | Section 313 |
| HUF partition rule cross-reference in succession cases | Section 171 | Section 315 |
Practical points
- Identify the exact date on which succession to the business or profession took effect.
- Separate income earned up to the succession date from income earned after that date.
- Check whether any assessment, reassessment or other proceeding was pending during a court, tribunal or insolvency process connected with the succession.
- If predecessor dues are sought from the successor, verify whether the Assessing Officer has recorded the statutory finding that recovery from the predecessor could not be made.
- Where an HUF business and partition are involved, the special HUF partition provision must also be considered.
This article provides a general explanation of the statutory framework. Application depends on the relevant tax year, nature and effective date of succession, pending proceedings, recovery facts and applicable transition provisions.