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<h1>Inheritance: Debt owed to deceased included in estate value for duty</h1> The High Court held that a debt due to the deceased, legally recoverable at the time of death, cannot be excluded from the principal value of the estate ... Agricultural Income, Capital Receipt Issues:1. Dispute over the inclusion of a debt in the principal value of an estate for estate duty purposes.Detailed Analysis:The case involved the estate of a deceased individual who was running a business in film financing and distribution. The deceased's accountant had overdrawn a substantial amount on his salary account at the time of the deceased's demise. The Assistant Controller of Estate Duty included this debt in the principal value of the estate, which was contested by the accountable persons. The Appellate Controller of Estate Duty also did not allow the exclusion of this debt, leading to an appeal to the Income-tax Appellate Tribunal. The Tribunal ruled in favor of excluding the debt from the principal value of the estate, citing the accountant's departure and the impracticality of recovering the amount. The Controller of Estate Duty challenged this decision, leading to a reference to the High Court.The primary question before the High Court was whether the Tribunal was correct in excluding the debt from the estate's principal value. The High Court analyzed the relevant provisions of the Estate Duty Act, emphasizing that a debt due to the deceased, which was legally recoverable at the time of death, cannot be excluded from the principal value of the estate. The Court highlighted that the Act does not provide for the exclusion of debts claimed to be bad debts post-death. The Court noted that the circumstances of the accountant leaving service and the difficulty in recovery were not valid reasons for exclusion without statutory provision.The Court further explained that the debt in question was a definite, ascertained, and recoverable sum due to the deceased at the time of death, making it part of the principal value of the estate. The Court rejected the Tribunal's reasoning based on the subsequent write-off of the debt, emphasizing that the debt was enforceable and recoverable when the deceased passed away. Ultimately, the High Court disagreed with the Tribunal's decision and held that the debt should not be excluded from the principal value of the estate for estate duty purposes. The Court ruled in favor of the Controller of Estate Duty, answering the reference question in the negative.
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