Law:

Section:

I. Section 46 of the Estate Duty Act, 1953 - Deductions - Deceased gifted certain property to his two minor sons - Gifts were accepted by deceased himself as guardian of his sons - Rent received from said property were deposited in proprietary concern of deceased - Whether since deposit of rent had continued right from commencement, it could not be treated to be a casual instance unassociated with gift - Held, yes - Whether, therefore, amounts standing in minor sons' name at time of death of deceased was not liable to be deducted - Held, yes FACTS-I The deceased gifted certain house property to his two minor sons. The gift was accepted by the deceased himself as guardian of his sons. The donees realised the rent from that property and deposited various amounts out of such realisation in the proprietary concern of the deceased. At the time of the death of the deceased certain amount was standing to their credit. The accountable persons claimed that this amount represented a debt due from the estate of the deceased so as to be deductible under section 44(a). The Assistant Controller rejected this claim relying on section 46(1)(b). This was confirmed by the Appellate Controller and the Tribunal. On reference : HELD-I Allowance for debts and incumbrances incurred by the deceased would not be made unless such debts or incumbrances were createdbona fide for full consideration in money or money's worth wholly for the deceased's own use and benefit. The deceased may during his lifetime transfer properties by way of gifts to persons in whom he is interested. The result would be, subject to the provision of the Act, an exclusion of those items of properties, which had gone out prior to the relevant period antecedent to his death. The deceased may, however, seek to get the benefit of the property that he has transferred by way of gift by obtaining loans from the donees and get deduction for the loans also. The effect of section 46 is to disallow debts to the extent of the property traceable to the deceased. The disjunctive "or" separating clauses (a ) and (b) of section 46(1) and the words "not being such property as aforesaid" occurring in clause (b ) would clearly show…

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