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TMI Blog1996 (7) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... of the liability on the life insurance policies and thus allowing exemption on Rs. 29,137 only instead of Rs. 70,000 ? (2) Whether, on the facts and circumstances of the case, the honourable Tribunal was right in not allowing the liability of Rs. 40,863 which is secured on life insurance policies and house property and treating the entire liability as secured on the house? " The deceased, Shri Samraj, died on August 25, 1979. He owned a property at Damodaran Street, Madras-10, which was used for residential purpose. The value of this property was adopted at Rs. 70,000 and there was no dispute about that. Since this was a residential house the accountable persons claimed exemption from levy of estate duty under section 33(1)(n) of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Department relied on an earlier order of the Tribunal on this aspect in the case of CEO v. Pushparani (EDA 91 Madras) 1973-74, dated December 12, 1975, wherein it was held that the exemption allowable under section 33(1)(n), could be only on the net amount after deducting the liability and not on the full amount. Following the above-said decision, the Tribunal held that rights in the property which the deceased had at the time of his death were something short of the full bundle of the ownership including the rights of enjoyment and possession. None the less the property was subject to the interest which is passed to the mortgagee. The property was thus subjected to an encumbrance consequent on the mortgage at the time of the death of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... curity would get discharged after the death of the deceased. In such a case, it was submitted that the accountable person is entitled to exemption under section 33(1)(n) of the Act with regard to the dwelling house valued at Rs. 70,000. So also the accountable person is also entitled to get deduction of Rs. 38,668 being the amount borrowed by the deceased on the life insurance policies out of the insurance amount payable. In such a case, out of Rs. 1,87,606 -- Rs. 38,668 is deducted and the balance would come to Rs. 1,48,938. Therefore, learned counsel submitted that the Appellate Controller of Estate Duty was correct in permitting the assessee for exemption of the dwelling house under section 33(1)(n) of the Act and also for the deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the dwelling house as an exempted asset under section 33(1)(n) of the Act. The deceased also took four insurance policies and on those policies the assessee also took a loan from the Life Insurance Corporation of India to an extent of Rs. 38,668. The deceased died on August 25, 1979. On the death of the deceased, the Life Insurance Corporation is liable to pay the insurance amount to the accountable person. The total insurance amount payable by the Life Insurance Corporation comes to Rs. 1,87,606 out of which the loan taken by the deceased is to be deducted. If Rs. 38,668 is deducted out of Rs. 1,87,606 the balance would come to Rs. 1,48,938 which is the insurance amount passing on the death of the deceased. Instead of that, the Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision relied on by learned standing counsel was that in CIT v. K. S. Vaidyanathan [1985] 153 ITR 11 (Mad) [FB]. This is a Full Bench decision of this court wherein while considering the provisions of section 2(m) of the Wealth-tax Act, 1957, this court held that if the entire asset is completely excluded in the computation of the net wealth, the debt in question obtained on the security of the said asset cannot be deducted in computing the net wealth. Similarly when a debt is incurred or acquired in relation to a property which is only partially exempted from wealth-tax, that portion of the debt which is attributable to the portion of the property exempted from wealth-tax cannot be deducted in the computation of the net wealth of the dece ..... X X X X Extracts X X X X X X X X Extracts X X X X
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