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Issues: Whether the accrued interest credited on loans advanced to the deceased by his minor sons, funded from the earlier gift made by the deceased, was liable to abatement under section 46(1) of the Estate Duty Act, 1953, and consequent disallowance under section 46(2).
Analysis: The allowance of a debt under section 44 is restricted by section 46 only to the extent that the consideration for the debt consisted of property derived from the deceased. Under section 46(1)(a), the relevant consideration is the property derived from the deceased that existed in the creditor's hands at the time the loan was made; later accretions such as interest on the deposited gift do not form part of that consideration. Clause (b) also operates only on the consideration for the debt, and not on the entire outstanding liability, even though the transaction may have been part of an arrangement connected with the earlier gift. The interest credited on the sons' accounts was therefore not property derived from the deceased within the meaning of section 46(1) so as to attract abatement. Section 46(2) could apply only to repayment or discharge of the principal amount representing the derived property, and not to repayments referable to interest.
Conclusion: The disallowance of the accrued interest amount under section 46(1) was not justified, and the question referred was answered in the negative, in favour of the accountable person.
Ratio Decidendi: For the purposes of section 46 of the Estate Duty Act, 1953, abatement is confined to the consideration for the debt that itself consisted of property derived from the deceased, and later interest or accretions on that property do not form part of the consideration liable to abatement.
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