Estate duty on cesser of residence rights fails where the resulting benefit cannot be valued under the valuation rule.

A right of free residence created by will was treated as an interest in property for estate duty purposes, so its cesser on death could attract tax only if the resulting benefit was capable of valuation. The analysis distinguished between interests extending to the whole income and those extending to less than the whole income, but held that a bare right of residence did not extend to any income of the property. As a result, the benefit arising on its cesser could not be valued under the valuation provision, and no estate duty was chargeable on that cesser despite the general rule deeming certain benefits to pass on death.

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Issues: Whether the value of the half share in the property could be deemed to pass on the death of the deceased and be subjected to estate duty in the light of the right of residence created by the will, and whether the benefit arising on the cesser of that interest was capable of valuation under section 40(a).

Analysis: A right of free residence was treated as an interest in property within the inclusive definition in section 2(15), so the cesser of that interest on death could attract section 7(1) to the extent that a benefit accrued or arose. However, liability to estate duty depended not merely on cesser of interest but also on whether the resulting benefit could be valued under section 40. Section 40(a) applied only where the ceased interest extended to the whole income of the property, and section 40(b) where it extended to less than the whole income. The right of residence did not extend to any income of the property, and therefore the benefit arising from its cesser could not be valued under section 40(a). On that footing, the cesser was not exigible to duty, and the contrary view based on the Madras decision was not accepted.

Conclusion: The value of the half share could not be subjected to estate duty merely because the widow's right of residence ceased on death. The benefit arising from the cesser of that interest was not liable to estate duty.

Ratio Decidendi: Where an interest ceasing on death does not extend to the whole or part of the income of the property, and the resulting benefit cannot be valued under section 40, no estate duty is chargeable on that cesser notwithstanding section 7(1).

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