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Issues:
1. Whether estate duty liability should be allowed as a deduction in the computation of the principal value of the estate? 2. Whether the finding of the Tribunal regarding the link between the original gift and subsequent loan for abatement under the Estate Duty Act is justified? Analysis: Issue 1: The court referred to a previous decision and ruled that estate duty liability cannot be deducted based on the previous judgment of Smt. Shantaben Narottamdas v. CED and Mancklal Premchand Shah v. CED [1978] 111 ITR 365. Issue 2: The deceased made cash gifts to his daughter, who later provided a loan to him. The accountable person claimed a deduction for the debt under s. 44 of the E.D. Act, but it was rejected by the Asst. Controller citing s. 46 of the Act. The Tribunal allowed the deduction, stating no link between the gift and loan. The revenue challenged this view, arguing that s. 46(1)(b) applies regardless of a direct nexus. The court analyzed s. 46(1)(b) and held that a person entitled to property derived from the deceased provided the loan, satisfying the provision. The court rejected the argument for a direct nexus between the gift and loan, emphasizing the inclusion of the gifted amounts in the lender's resources. The court disagreed with the accountable person's interpretation of the previous judgment in Rasiklal Lallubhai Shah v. CED [1980] 124 ITR 212, stating that s. 46(1)(b) does not require a direct nexus. Therefore, the court held that the loan amount is subject to abatement under s. 46(1)(b), contrary to the Tribunal's decision. The court answered the second question in the negative and against the accountable person. The court's interpretation of s. 46(1)(b) and the application of the law in this case demonstrate the importance of analyzing the provisions of the Estate Duty Act thoroughly to determine the abatement of debts based on the sources of consideration.
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