Joint guarantee liability deductible from estate duty only to the extent of the deceased's share where reimbursement is unavailable.

A joint guarantee liability was treated as a bona fide contractual liability deductible in computing estate duty because a surety's liability is co-extensive with the principal debtor's and the deceased remained liable at death. As the bank had unsuccessfully pursued the principal debtor and no effective reimbursement was available, the liability was deductible. However, because the obligation was joint and several, section 44(b) of the Estate Duty Act confined the deduction to the deceased's own share of the burden. The Tribunal was therefore correct in allowing deduction of one-half of the guarantee liability from the estate.

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Issues: Whether the liability arising under a joint guarantee agreement was deductible while computing the value of the estate for estate duty purposes.

Analysis: The liability under the guarantee agreement was a bona fide contractual liability for full consideration. A surety's liability is co-extensive with that of the principal debtor, and the deceased remained liable on the date of death. Since the bank had already pursued recovery from the principal debtor without success, no effective reimbursement was available. As the liability was joint and several, section 44(b) of the Estate Duty Act limited the deduction to the deceased's share of the burden.

Conclusion: The Tribunal was right in allowing deduction of one-half of the guarantee liability from the estate of the deceased, and the answer was in favour of the accountable person.

Final Conclusion: The estate was entitled to deduction of half of the joint guarantee liability, while the second question was not answered because it became unnecessary in view of the first answer.

Ratio Decidendi: A joint and several liability arising from a guarantee is deductible from the estate to the extent that no right of reimbursement is effectively available, but only to the extent of the deceased's own share where the liability is shared with another person.

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