Estate duty anti-avoidance nexus requires a real link between prior disposition and loan; remote gifts do not trigger charge.

Section 46(1)(b) of the Estate Duty Act applies only where the creditor's resources derived from the deceased have a real and legally relevant nexus with the loan transaction; a remote prior gift is not enough. On the facts, the vacant site gifted by the deceased was later developed and sold at market value before the son advanced loans, so the gift did not enable or facilitate the borrowings. The debt was therefore not abated under section 46(1)(b), and the consequential charge under section 46(2) also failed, with the questions answered in favour of the assessee and against the Revenue.

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Issues: Whether the deceased's debt of Rs. 30,000 due to his son could be abated under section 46(1)(b) of the Estate Duty Act, 1953, and whether the repayment of Rs. 50,000 within two years of death could be brought to charge under section 46(2) of that Act.

Analysis: Section 44(a) permits deduction of bona fide debts for full consideration, but section 46(1)(b) applies only where the creditor has at some time held property derived from the deceased as part of his resources in a manner relevant to the loan transaction. The proviso to section 46(1)(b), read with section 16(1), requires a real connection between the prior disposition and the loan, and is intended to prevent tax avoidance, not to create double taxation. On the facts, the gift of the vacant site in 1963 was followed by construction, later sale of the property to the deceased at market value, and only thereafter by the loans in 1969 and 1970. There was no direct or indirect nexus between the gift and the borrowings, and the gifted site had neither enabled nor facilitated the loans nor served as a basis for recoupment.

Conclusion: Section 46(1)(b) did not apply, and the consequential inclusion under section 46(2) also failed. The questions were answered in the affirmative, in favour of the assessee and against the Revenue.

Ratio Decidendi: For section 46(1)(b) to operate, there must be a legally relevant nexus between the deceased's prior disposition of property and the creditor's advance of the loan, so that the creditor's resources derived from the deceased can genuinely be linked to the borrowing transaction; a remote or unrelated prior gift is insufficient.

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