Estate-duty valuation: mortgage debt deducted in full before exemption, with no proportional scaling of the debt allowance.

Section 44 was construed to require a mortgage debt chargeable on immovable property to be deducted in full from the property's value before applying the exemption under section 33(1)(n), so the estate-duty base is the net asset value. The proviso did not justify scaling the debt allowance down merely because only part of the property was liable to estate duty, and no express provision mandated proportional reduction. Where competing computations were possible, the interpretation more favourable to the assessee was adopted, and the assessee's full deduction claim was upheld.

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Issues: Whether, in computing the principal value of the estate, the mortgage debt on the immovable property was to be deducted before granting exemption under section 33(1)(n), and whether the debt had to be proportionately scaled down because only part of the property was liable to estate duty.

Analysis: Section 44 was construed as requiring debts chargeable on a property to be deducted from the value of that property, so that the relevant figure for estate-duty computation is the net value of the asset. The exemption under section 33(1)(n) is then to be applied on that net value. The text of the proviso did not support reading the debt allowance as being reduced in proportion to the portion of the asset subjected to duty. No express provision required such scaling down, and where two computational methods were possible, the interpretation more favourable to the assessee was preferred.

Conclusion: The mortgage debt was deductible in full from the value of the property before granting the exemption under section 33(1)(n), and no proportional reduction of the debt was warranted; the assessee's computation was upheld.

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