Estate duty valuation of life interest must reflect simultaneous burden affecting market value at death.

For estate duty valuation on the cesser of a life interest, the principal value is to be determined by reference to the market price at the date of death. The text states that section 40 of the Estate Duty Act, 1953 cannot be read in isolation from section 36, because the property must be valued as it would be sold subject to any burden affecting its price. Where the deceased's life interest ends and a new life interest in favour of the son arises simultaneously on death, an intending purchaser would take that burden into account in fixing value. The property must therefore be assessed after allowing for the son's life interest.

---

---

Issues: Whether, in valuing property for estate duty on the cesser of a life interest, the principal value had to be determined by taking into account the subsequent life interest created in favour of the deceased's son.

Analysis: The reference arose under section 64(1) of the Estate Duty Act, 1953. The deceased held a life interest under a settlement deed, and on her death the benefit of that interest passed to her son for life, with remainder to the grandsons. The Revenue relied on section 7 read with section 40(a) to contend that the cesser of interest should be taken as the principal value without regard to the son's later interest. The Court held that section 40 cannot be read in isolation from section 36, because the principal value is the market price of the property at the time of death. Since the cesser of the deceased's interest and the creation of the son's life interest occur simultaneously on death, any intending purchaser would value the property after allowing for that burden.

Conclusion: The principal value had to be determined after giving due allowance for the son's life interest. The answer to the reference was in the affirmative and against the Revenue.

Ratio Decidendi: Where estate duty is levied on the cesser of a life interest, the principal value must be assessed under the market-value principle by taking into account any simultaneous beneficial interest that comes into existence on the deceased's death and affects the price of the property.

---