Court Allows Deduction of Joint Liability in Estate Valuation, No Estate Duty Payable

Controller Of Estate Duty Versus Hira Ial Tirath Ram Narang

Controller Of Estate Duty Versus Hira Ial Tirath Ram Narang - [1990] 186 ITR 449, 54 TAXMANN 277 Issues:
1. Deduction of liability arising from a joint agreement with a bank in the estate valuation.
2. Inclusion of interest in joint family property for estate duty calculation.

Analysis:

Issue 1: Deduction of Liability
The case involved a joint agreement between the deceased and another individual with a bank, resulting in a liability of Rs. 5,29,450. The deceased passed away with this liability outstanding. The accountable person sought to deduct this liability from the estate of the deceased. The Tribunal allowed deduction of half the amount, considering the joint and several liability of the deceased and the other individual. The Estate Duty Act, 1953, allows for deduction of debts incurred for full consideration. The court referred to relevant case law to support the deduction of liabilities arising from a guarantee given by the deceased. The court held that the liability from the joint agreement could be deducted from the estate of the deceased due to it being a liability for full consideration and joint and several in nature.

Issue 2: Inclusion of Interest in Joint Family Property
The accountable person also contended that the interest in the joint family property of the lineal descendants should not be included in determining the estate duty rate. However, the Tribunal rejected this contention. The court did not delve into this issue extensively due to the resolution of the first issue. Since the court had already determined that no estate duty was payable by the accountable person due to the deduction allowed from the estate for the joint liability, the court declined to answer the second question regarding the inclusion of interest in joint family property for estate duty calculation.

In conclusion, the court upheld the deduction of the liability arising from the joint agreement with the bank from the estate of the deceased. The court did not address the issue of including interest in joint family property for estate duty calculation as it was rendered moot by the resolution of the first issue.