CONTROLLER OF ESTATE DUTY Vs. BALAJI N

JUDGEMENT

(1.) THIS is a reference at the instance of the CED, Madras, in relation to the estate duty payable on the death of one Narayana Chettiar, who died on April 6, 1963. Between the years 1957 and 1960, commencing from May 26, 1957, the deceased had gifted properties worth Rs. 70,000 on May 26, 1957, and April 12, 1960, to Balaji, another sum of Rs. 70,000 on May 26, 1957, and April 12, 1960, to Govinda, a sum of Rs. 25,000 to Anusuya on April 6, 1958, and on the same day another sum of Rs. 25,000 to Saroja. Balaji, Govinda, Anusuya and Saroja are the children of the deceased. The deceased then borrowed from Balaji on March 3, 1960, Rs. 65,000, from Govinda another sum of Rs. 65,000 on the same day and from Anusuya and Saroja Rs. 25,000 each on the same date. So at the time of his death there were liabilities to the extent of Rs. 1,80,000. The creditors to whom the deceased owed these monies transferred their right to collect them to a firm called Balaji No. 2 on February 10, 1962. So at the time of the death, the liability of the deceased was towards the firm. No suggestion was made at any time that the transfer by the original creditors to the firm was sham or did not in fact take place. There is also no case and there is no material to show that Govinda and Balaji, who were the partners of the firm, Balaji No. 2, brought the properties, which they got by gift from the deceased, to the firm and thus made them the properties of the firm. On these facts, the question is whether the accountable persons are entitled to claim the sum of Rs. 1,80,000 which was said to be due from the deceased at the time of his death on April 6, 1963, as a deduction to be made from the value of the estate of the deceased by applying Section 44 of the E.D. Act. In dealing with Section 44 the provisions of Section 46 of the Act will have to be borne in mind, for, the deductions permissible under the earlier section will get abated if the conditions of Section 46 are satisfied.

(2.) THE Tribunal held that the accountable persons are entitled to have the entire amount of the debts claimed as deductions under Section 44 of the Act. THE CED applied to the Tribunal for a reference to this court and the Tribunal has referred the following two questions to this court for answering the same:

(3.) IN the light of the above, we have to answer the two questions by giving a combined answer by saying that no abatement whatever can be made by applying Section 46 to the total amount of the debts of the deceased amounting to Rs. 1,80,000. The accountable persons are entitled to have this amount of Rs. 1,80,000 deducted from the total value of the estate of the deceased at the time of his death on April 6, 1963. We answer the two questions in the above terms. We make no order as to costs in this case.