Section 46 nexus test under the Estate Duty Act failed where debts and repayments lacked connection to gifted property.

Section 46 of the Estate Duty Act applies only where there is a sufficient nexus between the debt or repayment and property derived from the deceased. Gifted property in the creditors' hands is not enough by itself; the relevant consideration must be property derived from the deceased, and any abatement is limited to that part only. On the facts, the advances to the deceased were sourced mainly from the donees' own resources and money-lending activity, with no real connection to the settled agricultural lands, and the repayments likewise lacked the required link. The additions under section 46 were therefore unsustainable and the deletion was upheld.

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Issues: Whether debts outstanding from the deceased and repayments made within two years before death could be brought within section 46 of the Estate Duty Act, 1953 on the footing that the creditors had earlier received settled property from the deceased.

Analysis: The provision applies only where there is a sufficient nexus between the debt or repayment and the property derived from the deceased. The existence of gifted property in the hands of the donees is not enough by itself; the relevant consideration must consist of property derived from the deceased, and any abatement is confined to that part of the consideration so derived. On the facts, the amounts advanced to the deceased were found to have been sourced substantially from the donees' own resources and money-lending activities, with no real connection to the settled agricultural lands, and the repayments likewise lacked the requisite link to the gifted property.

Conclusion: The additions under section 46 were not sustainable and the deletion made by the first appellate authority was upheld.

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