Accrued life insurance proceeds and proportionate estate duty deduction shape wealth-tax treatment of inherited assets.

An accrued right to receive life insurance proceeds on the death of the assured is property for wealth-tax purposes, so later receipt does not exclude it from net wealth even if the assessee follows cash accounting. The omission of that asset from assessment was therefore treated as an apparent mistake and corrected. Estate duty is deductible only to the extent attributable to the property actually passing to the accountable person under the will; any excess payment relating to other legatees or beyond the assessee's share is not fully allowable. The rectification that limited the deduction to the proportionate estate duty was accordingly sustained.

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Issues: (i) Whether the amount receivable under the life insurance policy, which became payable on the death of the assessee's father but was actually received later, was includible in the assessee's net wealth for the relevant assessment year; (ii) Whether the assessee was entitled to deduction of the entire estate duty paid on his father's estate or only to the proportionate amount relatable to the property bequeathed to him.

Issue (i): Whether the amount receivable under the life insurance policy, which became payable on the death of the assessee's father but was actually received later, was includible in the assessee's net wealth for the relevant assessment year.

Analysis: The right to receive the policy proceeds accrued on the death of the assured, and that right constituted property and an asset for wealth-tax purposes. The fact that the assessee maintained accounts on cash basis and received payment later did not alter the character of the accrued right as part of net wealth. The original omission of the amount from the assessment was therefore a mistake apparent from the record.

Conclusion: The amount under the life insurance policy was rightly includible in the assessee's net wealth, and the rectification was justified.

Issue (ii): Whether the assessee was entitled to deduction of the entire estate duty paid on his father's estate or only to the proportionate amount relatable to the property bequeathed to him.

Analysis: Under the estate duty law, an accountable person is liable only to the extent of the property actually received or deemed receivable by him. The assessee received property of limited value under the will, so the duty deductible in his wealth computation could extend only to the estate duty attributable to that share. Any excess payment, even if made, would either be outside his legal liability or would amount to a recoverable debt from the other legatees, and thus the full allowance originally granted was a mistake apparent from the record.

Conclusion: Only the proportionate estate duty relatable to the bequest received by the assessee was deductible, and the withdrawal of the excess allowance was correct.

Final Conclusion: Both rectification orders were sustained, and the assessee obtained no relief on either of the disputed wealth-tax issues.

Ratio Decidendi: For wealth-tax purposes, an accrued right to receive property is an asset forming part of net wealth, and estate duty is deductible only to the extent attributable to the property actually passing to the accountable person.

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