Time-barred loans and deemed property under estate duty fail absent conscious extinguishment by the deceased.

Amounts representing time-barred loans were not includible in the principal value of the estate under the Estate Duty Act because Explanation 2 to section 2(15) applies only where there is an extinguishment of a debt or other right at the expense of the deceased for the benefit of another person. The deeming fiction enlarges "property" for estate duty purposes, but it does not cover extinguishment brought about merely by lapse of time or passive inaction. As there was no factual basis to show that the deceased consciously allowed the debts to become time-barred, the amounts could not be treated as a deemed disposition and were excluded from the estate.

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Issues: Whether amounts representing time-barred loans allegedly abandoned by the deceased were includible in the principal value of the estate under Explanation 2 to section 2(15) read with sections 9 and 27 of the Estate Duty Act, 1953.

Analysis: Explanation 2 deems as property only the benefit arising from an extinguishment of a debt or other right at the expense of the deceased and for the benefit of another person. The deeming fiction enlarges the concept of property for estate duty purposes, but it does not extend to an extinguishment not brought about by the deceased. Mere lapse of time or passive inaction, without a conscious act or intention on the part of the deceased to allow the debt to be extinguished, does not satisfy the statutory requirement. On the facts, there was no basis to hold that the deceased consciously allowed the debts to become time-barred so as to amount to a deemed disposition.

Conclusion: The amounts were not includible in the principal value of the estate, and the answer to the reference was in favour of the assessee and against the revenue.

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