Estate duty deduction for revived tax and penalty liabilities allowed where the underlying demand was restored.

For estate duty valuation, a liability is deductible only if it is a real and enforceable burden at the date of death; if the assessment creating the demand is later annulled and the demand does not survive, the basis for disallowance falls away. On the facts, the later restoration of the Income-tax Officer's order revived the deceased's income-tax and penalty liabilities, so they were not false or non-existent liabilities for estate duty purposes. The deduction had therefore to be allowed in computing the principal value of the estate.

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Issues: Whether the liability for income-tax and penalty determined against the deceased, but later set aside in appeal, was deductible in computing the principal value of the estate under the Estate Duty Act, 1953.

Analysis: The question turned on the proper valuation of the estate as at the date of death. A liability may be taken into account if it exists as a real and enforceable burden at that date, but where the assessment giving rise to the demand is later annulled and the demand does not survive, the basis for disallowing the deduction disappears. On the facts, the later restoration of the income-tax Officer's order meant that the liability stood revived and could not be treated as an incorrect or non-existent liability for estate duty purposes.

Conclusion: The deduction for the income-tax liability of Rs. 1,51,215 and the penalty of Rs. 27,000 ought to have been allowed in computing the principal value of the estate.

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