Moloney (Inspector of Taxes) v Aib

• Jurisdiction: Ireland
• Judge: Mr. Justice Keane
• Judgment Date: 26 February 1986
• Neutral Citation: 1986 WJSC-HC 1259
• Court: High Court
• Docket Number: No. 425 R/1985,[1985 No. 425R]
• Date: 26 February 1986

1986 WJSC-HC 1259

THE HIGH COURT

No. 425 R/1985

MOLONEY (INSPECTOR OF TAXES) v. AIB

REVENUE

BETWEEN/

F.M. MOLONEY, INSPECTOR OF TAXES

APPELLANT

AND

ALLIED IRISH BANKS LIMITED AS EXECUTORS OF THE ESTATE OFFRANCIS J. DOHERTY, DECEASED

RESPONDENTS

Citations:

ADMINISTRATION OF ESTATES ACT 1959

ADMINISTRATION OF ESTATES ACT 1959 S7

BAKER V ARCHER-SHEE 1927 AC 844

BARNARDO'S HOMES V SPECIAL INCOME TAX CMRS 1921 2 AC 1, 1921 7 TC 646

INCOME TAX ACT 1967

INCOME TAX ACT 1967 S105

INCOME TAX ACT 1967 S208

INCOME TAX ACT 1967 S211

LORD SUDELEY'S CASE 1897 AC 11

REID'S TRUSTEES V CMRS OF INLAND REVENUE 14 TC 512

SUCCESSION ACT 1965 S10

SUCCESSION ACT 1965 S10(3)

WILLIAMS V SINGER 1921 1 AC 65, 1920 7 TC 387

Synopsis:

REVENUE

Income tax

Personal representative - Liability - Administration of estate incomplete - Defendant executors receiving income of estate - General duty of defendants to hold estate in trust for the persons by law entitled thereto - Nevertheless, defendants receiving or entitled to the income within the meaning of Income Tax Act, 1967, s.105 - (1985/425 R - Keane J. - 26/2/86) - [1986] IR 67

|Moloney v. Allied Irish Banks|

1 Judgment of Mr. Justice Keanedelivered the 26th day of February, 1986.

2 This is an Appeal by way of Case Stated from a decision of His Honour Judge David Sheehy that the Respondents were not assessable to tax in respect of income received by them as executors of the estate of Francis J. Doherty, deceased, during the period when his estate was being administered. The learned Circuit Judge held that the Respondents were not the persons "receiving or entitled to the income" in question within the meaning of Section 105 of the Income Tax Act, 1967. The Appellant having expressed dissatisfaction with the decision of the learned Circuit Court Judge as being erroneous in point of law, the learned Circuit Court Judge stated this case for the opinion of the HighCourt.

3 The case made on behalf of the Respondents, in the Circuit Court was that whatever the position might have been prior to the enactment of the Succession Act, 1965, since that Act personal representatives were no longer the persons "receiving or entitled to the income" within the meaning ofSection 105 and its statutory predecessors. This was because Section 10 (3) of the Succession Act provided that the personal representatives should hold the estate of the deceased as trustees for the persons by law entitled thereto and, as it was urged, the beneficiary and not the trustee is the person "receiving or entitled to the income" within the meaning of Section 105.

4 I do not think that this submission is well founded. Until such time as the estate of a deceased person is administered, the income of the estate is the income of the personal representatives. The Succession Act 1965has not altered this in the slightest. The personal representatives are to hold the estate of the deceased "as trustees for the persons by law entitled thereto" and not necessarily for the persons entitled by virtue of the terms of the testator's will or under the canons of intestate succession. Thus, in the case of an insolvent estate, they will hold it in trust for the creditors of the estate. While the Succession Act introduced many radical changes in our law, this Section was not one of them. It was indeed in terms a re-enactment of Section 7 of the Administration of Estates Act, 1959and, for all I know, may have had statutory predecessors even further back. Whether that be so or not, neither Section 7 of the 1959 Act nor Section 10 of the 1965 Act have altered the law as to the status of executors in relation to such income, which was stated as follows by Viscount Finlay in Barnardo's Homes .v. Special Income TaxCommissioners (1921) 2 A.C. 3 at p. 8 as follows:-

"It appears to me that the present case is really decided by the decision of this House in Lord Sudeley's Case. It was pointed out in that case that thelegatee of a share in a residue has no interest in any of the property of the testator until the residue has been ascertained. His right is to have the estate property administered and applied for his benefit when the administration is complete. The income from which this income tax was deducted was not the income of the charity. It was the income of the executors. They were, of course, bound to apply it in due course of administration but they were not trustees of any part of it for the charity. There had been no creation of a trust in favour of the charity in respect of this income, it was never paid over to the charity as income. What was ultimately paid over on the close of the administration was the share of the whole estate, consisting of capital and accumulated income, which fell to the charity. The executors, not the charity, were the recipients of this income, and there is no relation back in the case of the bequest of a...