Estate duty valuation of life interest cannot be treated as fractional ownership; multiplier method upheld absent legal error.

For estate duty valuation, a deceased's life interest passes on death and is valued under the statutory provisions governing passing and valuation of interests; it cannot be treated as equivalent to fractional ownership. Where the interest ceases on death and a benefit accrues by reason of that cesser, the relevant valuation principles apply to the property covered by the interest. The discussion also notes that market value as on the date of death is a factual question, and a capitalization multiplier will not be disturbed unless it is based on a wrong legal principle. The Tribunal's approach was therefore accepted on the multiplier issue, while its equation of life interest with fractional ownership was rejected.

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Issues: (i) Whether, for estate duty valuation, the deceased's life interest in the property could be equated with fractional ownership; (ii) whether the application of the multiplier of 12 1/2 years' purchase for valuing the premises was .

Issue (i): Whether, for estate duty valuation, the deceased's life interest in the property could be equated with fractional ownership.

Analysis: Life interest itself passes on death and section 5 is concerned with the passing of the interest, not with title or ownership. Once the interest passes, the property covered by that interest must be valued under section 36. Where the interest ceases on death and benefit accrues by reason of such cesser, section 40 applies. The valuation exercise therefore could not proceed on the footing that life interest and fractional ownership neutralised each other.

Conclusion: The Tribunal was not right in equating the life interest of the deceased with fractional ownership.

Issue (ii): Whether the application of the multiplier of 12 1/2 years' purchase for valuing the premises was .

Analysis: The principal value of the property had to be determined under section 36, and the market value as on the date of death was essentially a question of fact. Although the reasoning based on equivalence between life interest and fractional share was disapproved, the record did not show that the Tribunal applied any wrong legal principle in adopting the multiplier. The dispute on valuation turned mainly on the method of arriving at net rental income, and the multiplier itself did not render the valuation erroneous on the facts.

Conclusion: The Tribunal was right in applying the multiplier of 12 1/2 times for the purpose of determining the valuation of the premises.

Final Conclusion: The reference was answered in part in favour of the Revenue on the legal characterization of the deceased's interest, but the valuation method based on the multiplier was upheld.

Ratio Decidendi: For estate duty, a life interest that passes on death must be valued as such under the statutory valuation provisions, and it cannot be treated as equivalent to fractional ownership; however, the choice of capitalization multiplier will not be interfered with unless it rests on a wrong legal principle.

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