Estate duty deductions and debt abatement under section 46 depend on statutory tracing of resources, not direct loan linkage.

Estate duty liability was not allowable as a deduction in computing the principal value of the estate under section 44 of the Estate Duty Act, 1953, as the point was already covered against the accountable person on the facts. A loan due to the deceased's daughter was liable to abatement under section 46(1)(b) because the relevant test was whether the lender's resources had at any time included property derived from the deceased, not direct tracing of the gifted money into the loan. The reference was therefore answered in favour of the revenue.

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Issues: (i) Whether estate duty liability was allowable as a deduction in computing the principal value of the estate. (ii) Whether the unpaid loan amount due to the daughter was liable to abatement under section 46 of the Estate Duty Act, 1953.

Issue (i): Whether estate duty liability was allowable as a deduction in computing the principal value of the estate.

Analysis: The allowance claimed was governed by section 44 of the Estate Duty Act, 1953, and the point stood covered by an earlier decision of the same court. The deduction could not be allowed on the facts presented in the reference.

Conclusion: The issue was answered against the accountable person.

Issue (ii): Whether the unpaid loan amount due to the daughter was liable to abatement under section 46 of the Estate Duty Act, 1953.

Analysis: Under section 46(1)(b), abatement applies where the consideration for the debt is given by a person who was at any time entitled to, or among whose resources there was at any time included, property derived from the deceased. The decisive test was not a direct tracing of the very gifted money into the loan, but whether the lender was a person whose resources had included property derived from the deceased. As the daughter had earlier received substantial gifts from the deceased, the debt fell within section 46(1)(b), and the absence of a direct nexus in the narrower sense did not avoid abatement.

Conclusion: The issue was answered against the accountable person and in favour of the revenue.

Final Conclusion: The reference was answered in favour of the revenue, with both questions decided against the accountable person.

Ratio Decidendi: For section 46(1)(b) of the Estate Duty Act, 1953, abatement applies if the consideration for the debt was given by a person whose resources had at any time included property derived from the deceased, and a direct tracing of the loan to the gifted property is not .

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