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Inclusion of deceased's share in investment allowance reserve in computation of dutiable estate under Estate Duty Act. Analysis: The judgment revolves around the inclusion of the deceased partner's share in the investment allowance reserve of a firm in the computation of the dutiable estate under the Estate Duty Act. The deceased partner was a part of Liberty Enterprises, Karnal, and upon his death, a sum of Rs. 55,737 from the investment allowance reserve of the firm was included in the estate. The accountable persons challenged this inclusion before the Controller (Appeals), who upheld the decision of the Assistant Controller. The accountable persons contended that the investment allowance reserve was not property passing on the death of the deceased and was not within his disposing capacity, hence should not be subjected to estate duty. The legal arguments presented by the accountable persons focused on sections 5 and 6 of the Estate Duty Act, emphasizing that only property within the deceased's disposing capacity or property that actually passed on death could be subjected to estate duty. They highlighted the provisions of section 32A of the Income-tax Act, which restricted the distribution of the investment allowance reserve among partners and mandated its utilization for acquiring new machinery for business purposes within a specified period. The accountable persons argued that the deceased's share in the investment allowance reserve should be valued at a discounted figure considering the restrictions and limitations imposed by section 32A. In contrast, the departmental representative supported the inclusion of the deceased's share in the investment allowance reserve, citing that the reserve formed part of the capital invested by partners in the firm and was rightly included in the estate value. The representative disagreed with the contention that the reserve could not be passed on to the heirs of the deceased, stating that the value of the reserve was a legitimate addition to the estate. The Tribunal, after considering the submissions and relevant provisions, concluded that while the deceased's share in the investment allowance reserve could not be valued solely based on his profit-sharing ratio, the restrictions and conditions under section 32A warranted a discounted valuation. Additionally, factors such as the recent creation of the reserve, the presence of minor partners in the firm, and the limitation on utilization of the reserve for machinery acquisition were taken into account. Ultimately, the Tribunal allowed a partial appeal, sustaining an addition of Rs. 11,146 to meet the ends of justice. In summary, the judgment clarifies the valuation and inclusion of a deceased partner's share in the investment allowance reserve of a firm for estate duty computation, balancing legal provisions with practical considerations and restrictions imposed by tax laws.
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