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TMI Blog1984 (8) TMI 131X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1953 (' the Act ') and that, similarly, debts discharged aggregating to the extent of Rs. 55,647 (Rs. 33,318 and Rs. 22,329 to Smt. T. Sudarsanamma and Smt. T. Priyamvada, respectively) cannot be roped in under section 46(2). 3. The deceased had settled agricultural lands and borrowed or repaid as on date of death on the following four donees, all grandchildren, as under : ----------------------------------------------------------------------------------------------------------------------------------------------- Sl. No. Name of Debt duel Date of Value Value estimated donee discharged settlement estimated in gift-tax prior to two by assessment years prior to deceased death ----------------------------------------------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... took the view that, to the extent, the debt or repayment is from the accretions, in other words, the income from the settled property, neither section 46(1) or (2) could have any application. In coming to this conclusion, the authorities apparently followed the decision of Madras High Court in the case of Mrs. Ratnakumari Kumbhat v. CED [1975] 101 ITR 572 and of the Andhra Pradesh High Court CED v. P. Subramanyam [1981] 127 ITR 258. It is for this reason, the Assistant Controller himself limited the addition to the value of the settled property even where the debt was higher than the value as at the time of gift in the case of first settlee, Shri T. Pradyumna Kumar Reddy, under section 46(1) and the settlee, Smt. T. Sudarsanamma, under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lf had not taken the income part into consideration, apparently following the decision of the Andhra Pradesh High Court in P. Subramanyam's ease which agreed with the decision of the Madras High Court in Mrs. Ratnakumari Kumbhat's case. These two decisions have laid down that what abates under section 46(1) out of deductions claimed, is only the consideration which consisted of the property derived from the deceased and not any accretion by way of earnings thereon. We have, therefore, to confine ourselves to the question whether the fact that the donees had in their possession the agricultural lands gifted to them, would attract section 46 either in respect of outstanding loans (sub-section 1) or amounts repaid within two years (sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of the excess. (2) Money or money's worth paid or applied by the deceased in or towards satisfaction or discharge of a debt or incumbrance in the case of which sub-section (1) would have had effect on his death if the debt or incumbrance had not been satisfied or discharged, or in reduction of a debt or incumbrance in the case of which that sub-section has effect on his death shall, unless so paid or applied two years before the death, be treated as property deemed to be included in the property passing on the death and estate duty shall, notwithstanding anything in section 26 be payable in respect thereof accordingly. (3) The provisions of sub-section (2) of section 16 shall have effect for the purpose of this section as they h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cases to which clause (a) applies, the debt is to be abated because the consideration for the debt incurred by the deceased happens to be directly and undisguisedly property derived from the deceased. In the cases provided for by section 46(1)(b), however, the consideration is not directly any property derived by the creditors from the deceased. The debt to be abated under this clause is one which a person who was at some time entitled to, or amongst whose resources there was at some time included, any property derived from the deceased. In the present case, the contention of Mr. Jayaraman, learned counsel for the Controller of Estate Duty, was that the person from whom the deceased obtained the loan, namely, his son, Afsur, was the person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s father. It was not one of the properties available to him which the son could look to for the recoupment of the loan. There was no other kind of relation which could be established between the outstanding debt of Rs. 30,000 and the gift of the house site 7 years earlier." In coming to the conclusion, the High Court referred to the English decision in McDougal's Trustees v. IRC [1983] 143 ITR 698 (Appendix) dealing with analogous provisions in the Finance Act, 1984, and the Finance Act, 1939 (UK). Great stress had been laid by the learned departmental representative on the words ' at any time entitled to ' and ' at any time included ' in section 46(1)(b). In McDougal's Trustees' case it was, with reference to these words, pointed out as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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