ISMAIL MULLA GULAMALLY Vs. CONTROLLER OF ESTATE DUTY

JUDGEMENT

(1.) THIS reference under the E.D. Act is a sequel to the death of one Gulamally Akbarally on 1st August, 1960, leaving behind him his widow, three sons and four daughters. There are three questions raised in this reference and it will be convenient to take each question separately. The first question runs as follows

(2.) THE facts relating to this question are: The deceased was the owner of a house property bearing No. 19, Venkatachala Mudali Street, Park Town, Madras. On 24th August, 1951, he executed a deed of gift settling this property in favour of his two sons, Abdulla and Abbas, who were then minors aged 13 years and 4 years respectively. The gift was accepted by their guardian the donor himself. The property was valued for the purpose of stamp duty at Rs. 77, 100

(3.) THE accountable persons claimed that this amount represented debt due from the estate of the deceased so as to be deductible under s. 44(a) of the Act. The Asst. Controller rejected this claim relying on s. 46(1)(b) of the Act. The Appellate Controller confirmed the disallowance. On further appeal, the Appellate Tribunal felt that s. 46(1)(a) was applicable to the debt in question. The amount of loan had been advanced out of the rent collected by the two sons from the property gifted by their father to them and, therefore, in the view of the Tribunal, the value of the consideration of the debt could be taken to be the property derived from the deceased, which brought it within the scope of s. 46(1)(a) itself. Before the Tribunal reliance was placed on the proviso to s. 46(1)(b) on behalf of the accountable person. The Tribunal observed that the proviso was to the effect that if the value of the consideration of the debt exceeded that which could have been rendered available by application of all the property derived from the deceased, then no abatement was to be made in respect of the excess. As the value of the property gifted was Rs. 77, 100 in this case, the Tribunal considered that the loan in question, being only Rs. 22, 820, was not eligible for any abatement contemplated by that provision. The accountable person has sought reference of the above question, already set out on the above factsThe learned counsel for the accountable person contended that this is a case where s. 46(1)(a) of the Act did not apply and that, if at all, s. 46(1)(b) would have applied. He tried to bring the case within the scope of the proviso to s. 46(1)(b) if that provision is taken to apply. The endeavour of the learned counsel for the Revenue was to show that it was unnecessary to go into s. 46(1)(b) or to consider the effect of the proviso on the facts herein and that the present case squarely came within s. 46(1)(a) of the Act Section 5 of the E.D. Act contemplates levy of estate duty upon the principal value ascertained in accordance with the provisions of the Act of all the property which passed on the death of every person, who died after the commencement of that Act. Sections 6 to 16 provide for the properties that are deemed to pass on the death of a person. With reference to the principal value so ascertained in accordance with the provisions of this Act, deductions are contemplated by s. 44. Section 44 provides that in determining the value of an estate for the purpose of estate duty, allowance is to be made for funeral expenses not exceeding Rs. 1, 000 and for debts and incumbrances. Allowance for debts and incumbrances incurred by the deceased would not be made unless such debts or incumbrances were created bona fide for full consideration in money or money's worth wholly for the deceased's own use and benefit. Section 46 contemplates disallowance of certain debts. As the whole section is material to this reference, it would be useful to set out the provision in full