Law:

Section:

Section 44, read with section 74 of the Estate Duty Act, 1953 - Deductions - Debts and encumbrances - Whether estate duty payable on estate of deceased person is neither debt nor an encumbrance liable to be deducted under section 44 - Held, yes FACTS The deceased was the karta of an HUF. The entire property belonged to the HUF and the Assistant Controller computed the total value of the property and took 1/3rd as the value representing the cesser of interest under section 7. The asessee claimed that the estate duty payable on the assessment was also an amount which should be deducted in order to raise the principal value of the estate. This claim was negatived by the Appellate Controller. The Tribunal dismissed the appeal of the assessee. On reference: HELD The Act envisages levy and payment of estate duty on the principal value of the proprietary interest which the deceased had in the estate at the time of his death. Such proprietary interest has to be estimated under section 36 in accordance with the price, which in the opinion of the Controller, it would have fetched if sold in the open market at the time of the death of the deceased. A close reading of section 36 indicates that what has to be evaluated is the principal value of the property which passes on the death of the deceased and not the principal value of the property which as a result of the death of the deceased comes to be vested in the hands of his heirs and legal representatives. What passes at the time of death of the deceased in his proprietary interest in the estate. If that proprietary interest at the time of his death is not subject to any charge or encumbrance, it is the interest of the deceased free of any charge that passes. But then due to certain reasons some obligations may get attached to the property which passes as a result of the death of the deceased. In such a case what vests in the hands of the heirs or the legal representatives of the deceased would be property subjected to such charge or obligation created in respect of the property passing on the death of the deceased. There may be no time lag between the death of the deceased and his estate passing to his heirs and legal…

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