Estate duty on exempt dwelling house: loan secured on insurance policies is deductible from policy proceeds, not house value.

A dwelling house valued below Rs. 1 lakh and used as a residence qualified as an exempt asset under section 33(1)(n) of the Estate Duty Act, 1953. A liability secured by collateral on life insurance policies was not an encumbrance deductible again from the house value, because the security stood discharged and the insurance proceeds became payable to the accountable person. The loan amount was deductible only from the policy proceeds, while separate deductions for Housing Board dues and property tax remained admissible. Wealth-tax principles on mortgage-induced depression of value did not control the estate duty computation.

---

---

Issues: Whether the liability of Rs. 38,668 secured on the life insurance policies and the dwelling house at 25, Damodaran Street, Madras-10, was to be deducted from the value of the house for the purpose of estate duty, or whether the house was fully exempt under section 33(1)(n) and the liability was deductible only from the policy amount.

Analysis: The dwelling house was valued below Rs. 1 lakh and was used as a residence, so it qualified as an exempted asset under section 33(1)(n) of the Estate Duty Act, 1953. The liability to the Life Insurance Corporation was not an encumbrance surviving against the house after death, because the insurance proceeds became payable to the accountable person and the collateral security stood discharged. The deductions of the Housing Board amount and property tax were distinct and admissible, but the loan amount could not be deducted again from the house value. The reasoning based on mortgage depression of value under wealth-tax principles did not govern the estate duty computation.

Conclusion: The liability of Rs. 38,668 was not deductible from the principal value of the dwelling house, and the accountable person was entitled to full exemption of the house under section 33(1)(n) together with deduction of the loan amount only from the insurance proceeds.

Ratio Decidendi: Where a dwelling house qualifies as an exempted asset and the loan is secured by collateral on insurance policies, the loan amount is deductible from the policy proceeds and not again from the value of the house for estate duty purposes.

---