Estate duty abatement rules: property derived from the deceased, gifted funds, and post-death payments were all brought within the charging provisions.

For purposes of the Estate Duty Act, consideration derived from the deceased includes sale proceeds and other property representing the subject-matter of the deceased's disposition, so a debt otherwise deductible under section 44(a) is abated under section 46(1)(a) where the debt is met from such derived property. The provision operates on its text and does not require proof of an intention at the time of gift to create a later liability. Section 46(1)(b) also applies where gifted amounts received by the deceased's sons were used to discharge the liability, without any need for interposed third persons. Amounts paid within two years of death were accordingly includible under section 46(2) as property deemed to pass on death.

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Issues: (i) Whether a debt otherwise deductible under section 44(a) was liable to abatement under section 46(1)(a) where the consideration consisted of sale proceeds of property derived from the deceased, and whether the provision required proof of an intention at the time of gift to create a later liability; (ii) Whether section 46(1)(b) applied to a debt discharged out of gifted amounts received by the sons of the deceased without any requirement of interposition of other persons; (iii) Whether the amount paid within two years of death was includible under section 46(2).

Issue (i): Whether a debt otherwise deductible under section 44(a) was liable to abatement under section 46(1)(a) where the consideration consisted of sale proceeds of property derived from the deceased, and whether the provision required proof of an intention at the time of gift to create a later liability.

Analysis: The statutory scheme permits deduction of debts under section 44(a) only where they are bona fide debts for full consideration in money or money's worth wholly for the deceased's own use and benefit. Section 46(1)(a) cuts down that allowance where the consideration for such debt consists of property derived from the deceased. The expression "property" was treated as including sale proceeds, and section 16(2) reinforced that property derived from the deceased includes property represented directly or indirectly by the subject-matter of a disposition. No additional requirement of a contemporaneous intention by the donor to borrow back the gift was found in the language of the provision.

Conclusion: Section 46(1)(a) applied, and the deduction was rightly disallowed in favour of the Revenue.

Issue (ii): Whether section 46(1)(b) applied to a debt discharged out of gifted amounts received by the sons of the deceased without any requirement of interposition of other persons.

Analysis: Section 46(1)(b) applies where the consideration is given by a person who was at any time entitled to, or had amongst his resources, property derived from the deceased. The sons had received the gifted amount from the deceased and used it to discharge his liability. The language of the provision did not require any interposition of third persons between the deceased and the lender or creditor.

Conclusion: Section 46(1)(b) applied, and the disallowance was correct in favour of the Revenue.

Issue (iii): Whether the amount paid within two years of death was includible under section 46(2).

Analysis: Once the first question in the first reference was answered against the accountable person, the payment made to the two ladies within two years of death necessarily attracted section 46(2), which treats such money or money's worth as property deemed to pass on death.

Conclusion: The amount was includible, and the question was answered in favour of the Revenue.

Final Conclusion: The references were disposed of by answering all referred questions against the accountable persons and upholding the Revenue's position on deduction and inclusion of the disputed liabilities and amounts.

Ratio Decidendi: For the purposes of section 46 of the Estate Duty Act, consideration derived from the deceased includes sale proceeds or other property representing the subject-matter of the deceased's disposition, and the section operates according to its text without importing an additional requirement of donor's intention or interposed persons.

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