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TMI Blog1978 (7) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... allowable as deduction from the estate of the deceased ? " We will now notice the material facts : The estate belonged to one Pasumarthi Subrahmanyam, who died on April 24, 1973. His wife, as the accountable person, rendered an account of the estate disclosing net principal value of Rs. 1,84,428. During the course of the assessment proceedings, the accountable person claimed deduction of a sum of Rs. 82,034.55, which represents the debts of the deceased. During the lifetime of the deceased, the deceased made certain cash gifts to his foster daughter, her husband, and his own wife. He gave cash gifts to his foster daughter of Rs. 5,000 each on April 1, 1954, and May 30, 1957. The interest on these amounts up to the date of the death of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue succeeded in persuading the Tribunal to refer the above question for our opinion. Before we take up for consideration the legal aspect of the case, we will have to note that there is no dispute at all about the bona fides of the transactions between the deceased on the one side and his wife, the foster daughter and foster daughter's husband on the other. The truth and genuineness of the gifts made by the deceased in favour of these three individuals are not doubted. It is also not doubted that the deceased utilised these amounts for his own purpose, as a consequence of which interest accrued on these amounts. The accounts disclosed that these three individuals were being credited with interest that accrued on these amounts periodic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sri P. Rama Rao, learned standing counsel for the revenue, says that but for s. 46, which we will presently notice, these debts come within the later limb of cl. (a) because they were incurred bona fide for full consideration in money or money's worth wholly for the deceased's own use and benefit. Therefore, if we are to go on s. 44 alone, these debts will have to be taken out of the estate of the deceased to arrive at the chargeable value of his estate. However, ss. 45 and 46 impose certain limitations on debts deductible. Section 45 is not relevant for the purpose of consideration of the question referred to us; only s. 46 is material. Its heading is "Further limitations ". Sub-section (1)(a) is as follows : " (1) Any allowance which, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y is not allowed to be deducted from the estate. But this abatement of fiction, as created by s. 46 is in stated terms and is specifically limited to an extent proportionate to the value of any of the considerations given therefor which consisted of property derived from the deceased. If the debt consists of more than the extent proportionate to such value of the consideration given from the property of the deceased, then it does not abate and is not subject to the fictional abatement. This is clearly brought out by s. 46 itself. Therefore, only the consideration which consisted of property derived from the deceased abates and nothing else. If that has gained interest or dividend or profits, they cannot be brought within the scope of sub-s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of subs. (2) of s. 16 shall have effect for the purpose of this section as they have effect for the purpose of that section. But s. 16 is concerned only with annuities or other interest purchased or provided out of property derived from the deceased. By no stretch of imagination could the interest accrued and the principal amounts be called annuities or other interests provided out, of the property of the deceased. Particular emphasis is laid by Sri Rama Rao on the definition contained in s. 16(2)(c) of the expression " subject-matter ". It is an inclusive definition and says that in relation to any dispute, any annual or periodical payment made or payable under or by virtue of the disposition is also a " subject-matter " within the meanin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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