Trust loan not linked to transferred corpus was excluded from estate duty under section 46(2).

A valid trust loan was considered outside section 46(2) of the Estate Duty Act where the trust had been created years earlier, its genuineness was undisputed, and the deceased derived no direct or indirect benefit from the trust corpus. The amount advanced came from accumulated income or deposits generated by the trust property, not from the corpus transferred into trust, and there was no sufficient nexus between the earlier gift and the later temporary borrowing. On that reasoning, the loan amount was not includible in the estate and the departmental challenge failed.

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Issues: Whether the amount borrowed by the deceased from a valid trust, being sourced from accumulated rent or deposits and not from the trust corpus, was includible in the estate under section 46(2) of the Estate Duty Act.

Analysis: The trust had been created about ten years before the death, its genuineness was not disputed, and the deceased had not derived any direct or indirect benefit from the trust corpus. The loan was taken not from the property transferred into trust but from accumulated income or deposits arising from that property. There was no connecting link between the earlier gift and the later temporary loan, and the authorities relied upon by the department were held to be inapplicable on the facts.

Conclusion: Section 46(2) of the Estate Duty Act did not apply to the loan amount, and the deletion of Rs. 45,057 from the estate was . The departmental appeal failed.

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