Estate duty treatment of unbilled professional fees: receivables at death are includible, with higher collection-charge deduction allowed.

Unbilled professional fees earned by a deceased professional were treated as includible in the principal value of the estate because the right to remuneration had arisen from services already rendered, and the absence of written bills or contracts did not negate the receivable. For estate duty purposes, the relevant inquiry was whether property passed on death, and the statutory concept of property included interests passing immediately or after an interval, certainly or contingently. The allowance for collection charges was also increased to reflect the likelihood of recovery costs and possible litigation, resulting in partial relief.

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Issues: (i) Whether fees receivable by the deceased professional from clients for work done but not billed during his lifetime formed part of the principal value of the estate; (ii) Whether the deduction allowed towards collection charges required enhancement.

Issue (i): Whether fees receivable by the deceased professional from clients for work done but not billed during his lifetime formed part of the principal value of the estate

Analysis: The deceased had rendered professional services and there was an implied understanding that remuneration would be paid for such services. The absence of written contracts or bills raised during lifetime did not negate the existence of a receivable. For estate duty purposes, the relevant inquiry was whether property had passed on death. Section 2(16) of the Estate Duty Act, 1953 includes property passing immediately or after an interval, certainly or contingently, and the receivable fees fell within that wide statutory description.

Conclusion: The fees receivable were includible in the principal value of the estate.

Issue (ii): Whether the deduction allowed towards collection charges required enhancement

Analysis: Although the receivable fees were includible, the facts showed that recovery would involve possible litigation and expenditure if payment was not made voluntarily. On that basis, a higher allowance towards collection charges was considered appropriate than the percentage earlier granted.

Conclusion: The deduction was enhanced to 25 per cent.

Final Conclusion: The inclusion of the outstanding professional fees in the estate was sustained, but the allowance for collection charges was increased, resulting in partial relief to the assessee.

Ratio Decidendi: Under the Estate Duty Act, professional fees earned but unpaid at death are property passing on death and are includible in the estate, even if not billed during lifetime, because an implied right to remuneration exists and immediate quantification is not essential.

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