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Controller of Estate Duty, Bombay Vs. N.H. Kotak - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberEstate Duty Reference No. 4 of 1969
Judge
Reported in[1982]134ITR256(Bom)
ActsIncome Tax Act, 1961 - Sections 271 and 271(1); Wealth Tax Act, 1957 - Sections 2; Estate Duty Act, 1953 - Sections 5, 7 and 44
AppellantController of Estate Duty, Bombay
RespondentN.H. Kotak
Appellant AdvocateR.J. Joshi, Adv.
Respondent AdvocateI.M. Munim, Adv.
Excerpt:
(i) direct taxation - goodwill - sections 5 and 7 of estate duty act, 1953 - whether value of any portion of goodwill of firm in which deceased was partner included in dutiable estate either under section 5 or 7 - clause of partnership deed provides that deceased's share in goodwill upon his death passed to surviving partners - liability to pay estate duty will automatically arise under section 5 - value of deceased's share in goodwill includible in dutiable estate. (ii) penalty - section 271 of income tax act, 1961 and section 44 of estate duty act, 1953 - whether amount representing portion of penalty levied under act of 1961 on firm of which deceased was partner could be deducted in determining value of property passing on death of deceased - amount of penalty that may be leviable can.....kantawala, c.j.1. in this matter the following three questions are referred to us for our determination: '(1) whether, on the facts and in the circumstances of the case, the value of any portion of the goodwill of the firm in which the deceased was a partner could be included in the dutiable estate either under section 5 or under section 7 of the estate duty act (2) whether, on the facts and in the circumstances of the case, the amount of rs. 5,785 lying to the credit of the wife of the deceased in the books of the firm in which the deceased was a partner, could be included in the property deemed to pass on his death under section 10 of the estate duty act (3) whether, on the facts and in the circumstances of the case, the amount of rs. 26,312 representing a portion of the penalty.....
Judgment:

Kantawala, C.J.

1. In this matter the following three questions are referred to us for our determination:

'(1) Whether, on the facts and in the circumstances of the case, the value of any portion of the goodwill of the firm in which the deceased was a partner could be included in the dutiable estate either under section 5 or under section 7 of the Estate Duty Act

(2) Whether, on the facts and in the circumstances of the case, the amount of Rs. 5,785 lying to the credit of the wife of the deceased in the books of the firm in which the deceased was a partner, could be included in the property deemed to pass on his death under section 10 of the Estate Duty Act

(3) Whether, on the facts and in the circumstances of the case, the amount of Rs. 26,312 representing a portion of the penalty levied under the Income-tax Act, on the firm, of which the deceased was a partner, could be deducted in determining the value of the property passing on the death of the deceased ?'

2. Out of these questions, the first question has been referred at the instance of the revenue, while the other two questions are referred at the instance of the accountable person. It may be stated at the outset that so far as question No. 2 is concerned, Mr. Mehta on behalf of the accountable person is not pressing the same and, accordingly, question No. 2 need not be answered.

3. Questions Nos. 1 and 3 arise by reason of the levy of estate duty under the E.D. Act, 1953 (hereinafter referred to as 'the Act'), in respect of the estate passing on the death of late Ratilal H. Kotak (hereinafter referred to as 'the deceased'), who died on July 12, 1961. There was a firm of M/s. Kotak & Co., in which the deceased was a partner at the time of his death. The constitution of the firm was governed by the terms and conditions contained in a partnership deed executed on February 19, 1953. Under the partnership deed, the deceased was entitled to share profits and bear losses in respect of the partnership business at 8%. The question of levy of estate duty in respect of the deceased's interest in the goodwill will depend upon the terms and conditions of the partnership deed and we will refer to the same a little later.

4. The firm, M/s. Kotak & Co., had not declared certain transactions to the I.T. authorities for the assessment years 1947-48 to 1953-54 (both inclusive). Inquiries were commenced in relation to these transactions during the lifetime of the deceased. On September q, 1960, the firm applied to the ITO for a settlement in regard to these transactions. On September 10, 1962, the firm officially applied to the Commissioner for a settlement on certain terms. On March 29, 1963, the Commissioner passed an order accepting the settlement in accordance with the terms set out by him in the said order. According to these terms, the penalty at the rate of 20% of the tax on the additional income to be assessed for the years 1947-48 to 1953-54 was to be levied under s. 271(1)(c) of the I.T. Act, 1961. The question arose whether the accountable person was justified in making a claim for the deduction of a portion of the penalty levied on the firm by the taxing authorities. The third question relates to that item of penalty pertaining to the share of the deceased. The Asst. Controller of ED included an amount of Rs. 80,000 in the dutiable estate on account of the share of the deceased in the good will of the firm. He rejected the claim of the accountable person for deduction of Rs. 26,312 in respect of proportionate liability of the estate of the deceased qua the penalty imposed by the Commissioner.

5. In a appeal preferred by the accountable person, the Appellate Controller of Estate Duty confirmed the order of the Asst. Controller both in respect of the levy of estate duty in respect of the value of the good will pertaining to the deceased's share therein as well as the rejection of the claim pertaining to the deceased's estate duty liability in respect thereof.

6. On further appeal by the accountable person before the Tribunal, the contention of the accountable person in respect of the goodwill was accepted by it. The tribunal held that no amount could be added by reference to the goodwill by reason of the property directly passing on the death of the deceased. Upon a scrutiny of the relevant clauses of the partnership deed, the Tribunal felt that the goodwill of the firm would absolutely belong to the surviving or continuing partners. This would naturally lead to the inference that the goodwill belonged absolutely to the continuing partners at any point of time and that it so belonged at the time of the death of the deceased. The Tribunal also referred to the provisions of clause 9 of the partnership deed and felt that the cumulative effect of the provisions of clause 9 read with those of clause 7(a) of the partnership deed indicated that to all intents and purposes the head partner was the owner of the goodwill of the firm. The deceased had no interest in the goodwill of the firm. The deceased had no interest therein immediately before his death and the surviving partners, apart from the head partner, did not derive any benefit or lose any interest on the death of the deceased. Upon scrutiny of the clauses of the partnership deed the Tribunal took the view that goodwill was completely at the disposal of the head partner and accordingly neither s. 5 nor s. 7 of the Act could be invoked for valuing any portion of the goodwill or including the same under the dutiable estate. So far as the claim in respect of deduction of penalty levied on the firm was concerned, the Tribunal upheld the action of the E.D. authorities. It noted the difference that exists between a statutory liability like income-tax liability and the liability in respect of deduction of penalty levied on the firm was concerned, the Tribunal upheld the action of the E.D. authorities. It noted the difference that exists between a statutory liability like income-tax liability and the liability in respect of penalty that may be imposed in future. According to the Tribunal, the liability to pay penalty arises only when the ITO was satisfied about the existence of the conditions which give him jurisdiction and the quantum thereof depended upon the circumstances of each case and the exercise of discretion by the taxing authorities. The Tribunal took the view that the liability to pay penalty could not possibly arise till the competent authority passed the order levying penalty for the year in question. In the present case, such an order was passed only in the year 1963, i.e., nearly two years after the death of the deceased. Even though the Tribunal felt that the income that was later on assessed, undoubtedly accrued to the deceased before his death, the same could not be said about the accrual of the liability to pay penalty. The Tribunal confirmed the order of the E.D. authorities holding that they were justified in rejecting the claim for a deduction of the share of the deceased in the penalty levied on the firm of which he was a partner. It is from this order of the Tribunal that the first question has been referred to us at the instance of the revenue while the third question has been referred to us at the instance of the accountable person.

7. Mr. Joshi on behalf of the revenue submitted that the Tribunal was in error in taking the view that neither under s. 5 nor under s. 7 of the Act would the value of any portion of the goodwill could be included in the dutiable estate of the deceased. He submitted that the Tribunal misconstrued the effect of the relevant provisions of the partnership deed. He emphasised that in the events, which admittedly existed at the time of the death of the deceased, the deceased had a share in the goodwill of the firm which is deemed to have passed on his death, even though, in view of the peculiar provisions of the partnership deed, the valuation of such goodwill may have to be determined having regard to the said provisions. He urged that the Tribunal was completely in error in taking the view that the Tribunal was in error having regard to the facts and circumstances existing on the date of death of the deceased in taking the view that the head partner, in view of the provisions of the partnership deed, was the absolute owner of the goodwill of the firm. So far as the deduction in respect of the appropriate amount representing a portion of the penalty levied under the I.T. Act on the firm was concerned, he submitted that the view that has been taken by the Tribunal is correct. He emphasised that there is a clear distinction between the taxation liability and the liability in respect of a penalty which may be imposed for the first time after the death of the deceased. So far as the taxation liability is concerned, he urged that it may, having regard to the settled position in law, be regarded as a debt, but so far as the liability in respect of the penalty is concerned, which was levied for the first time after the death of the deceased, it cannot be regarded as a debt due by the estate at the time of death of the deceased and the taxing authorities and the Tribunal were right in taking the view that the accountable person was not justified in claiming a deduction in respect of the appropriate share representing a portion of the penalty levied under the I.T. Act on the firm of which the deceased was a partner. Mr. Mehta, on the other hand, on behalf of the accountable person submitted that the view that has been taken by the Tribunal in respect of the goodwill is correct. He emphasised the peculiar provisions of the partnership deed and the blanket powers that have been conferred upon the head partner under the terms and conditions of the deed. He submitted that if regard be had to these provisions, there can be no doubt that the deceased at the time of his death had no interest in the goodwill and it was the head partner who was entitled to the same. In effect he supported the order that has been passed by the Tribunal in respect of the exclusion of the item of goodwill while determining the liability to pay estate duty. So far as the question of penalty is concerned, he submitted that penalty ought not to be treated on a different footing than that of a tax liability. He urged that now it is well settled, in view of the decision of the Supreme Court in the case of Kesoram Industries and Cotton Mills Ltd. v. CWT : [1966]59ITR767(SC) , that the liability to pay a tax like the income-tax was a present liability though the tax became payable after it was quantified in accordance with the ascertainable data. So also, according to his submission, the liability to pay a penalty levied by the taxing authorities was also a present liability and even if it is quantified at a later date, while determining the value of the estate, which is liable to estate duty, the deceased's share in respect of such penalty ought to be taken into account while determining the valuation of the estate which can be subjected to estate duty. In short, his submission was that no distinction can be made between a tax liability and a liability in respect of penalty and both of them ought to be governed by the same principles. His submission was that the E.D. authorities and the Tribunal were in error in rejecting the claim of the accountable person for the deduction of a proportionate amount of the penalty levied under the I.T. Act on the firm, of which the deceased was a partner, which the estate of the deceased partner would have to bear.

8. The first question that we have to consider in the present case is whether the value of any portion of the goodwill of the firm in which the deceased was a partner could be included in the dutiable estate either under s. 5 or under s. 7 of the Act. The deceased was admittedly a partner in the firm, M/s. Kotak & Co., constituted under a deed of partnership dated February 19, 1953. The firm consisted of ten partners and the deceased as one of the partners thereof was entitled to a share of 8 per cent in the profits and was liable to bear the losses in the same proportion. Some of the special and particular provisions of this partnership deed are cls. 4 and 5. Clause 4 of the partnership deed provided that Tribhovandas Harjivandas Kotak, a partner having 21 per cent. share, was, during his lifetime, to be regarded as a head partner of the firm. All the other partners were under the obligation to act according to his instructions and directions in all matters relating to the partnership business and its conduct and management. That clause further provided that either during the absence of Tribhovandas from Bombay or during any inability through illness or otherwise, another partner, Girdharlal Bhawanbhai Kotak, who had 5 per cent share, was to be the head partner of the partnership. Under clause 5 of the partnership deed, the head partner was conferred a power to admit any new partner or partners with such share or shares as he may think proper to be provided for by such readjustment of the shares of other partners, as to him may seem fit. The head partner had also the right of removal of any partner or partners with the consent of the majority of the partners. Clauses 7 and 9 of the deed of partnership are relevant for our present purpose and they are as under:

'7. The firm shall not be deemed to be dissolved in the event of any of its partners for the time being ceasing to be a partner therein by reason of his retirement, demise or otherwise howsoever and may be continued by the then surviving or continuing partners in which case the following provisions shall apply:

(a) Nothing shall be payable to the outgoing partner or his legal representatives for or in respect of the name, style and goodwill of the firm which subject to the provisions of clause 9 shall absolutely belong to the surviving or continuing partners.

(b) As from the date at which the outgoing partner ceases to be a partner his share in the firm shall cease and the said share shall be redistributed to anyone or more of the surviving or continuing partners in such proportion and manner as the head partner may decide.

(c) The moneys that may be due to the outgoing partner from the firm on account of his share in the profits of the firm up to the time of his ceasing to be a partner and moneys due to him in respect of his capital if any in the firm shall be determined in accordance with clause 6 and be payable to him or his legal representative at the end of the Samvat year, in which he has ceased to be a partner and subject to repayment by the outgoing partner or his legal representatives of all moneys due by him to the firm including his share of the losses of the firm up to the date of his ceasing to be a partner.

(d) The outgoing partner or his legal representative shall not have any rights or claims except such as are expressly given under this clause.

9. Notwithstanding anything to the contrary or otherwise contained in these presents it is agreed that the name, style and goodwill of the firm shall at all times be at the disposal of the head partner for the time being who shall have the right at any time whether during the partnership or at its dissolution to close the name and style of Kotak & Co., and/or to transfer the name, style and goodwill of the firm to anyone or more of the partners as he may think fit in his absolute discretion without any consideration.'

9. Having regard to the provisions of clause 9 it is strongly urged by Mr. Mehta on behalf of the accountable person that throughout the duration of the partnership the head partner had overriding power in respect of the name and style and goodwill of the firm and under this clause either during the subsistence of the partnership or at the time of its dissolution it was open to the head partner to close the name and style of Kotak & Co., and to transfer the name, style and goodwill of the firm to anyone or more of the partners as he may think fit in his absolute discretion without any consideration. His submission was that since a blanket power was conferred upon the head partner under clause 9, the deceased, in effect, had no share in the goodwill. It is not possible to accept this contention, if regard be had to the admitted and proved facts of the case. It cannot be gainsaid that under clause 9 of the partnership qua goodwill somewhat absolute powers are conferred upon the head partner, but it is not disputed that such powers were not exercised by the head partner at any time prior to the date of death of the deceased on July 12, 1961. The result, therefore, will be that the rights of the various partners qua goodwill of the firm of Kotak & Co., will be governed by the provisions of clause 7 of the partnership deed. Under the provisions of clause 7 the deceased partner or his legal representatives are not entitled to any amount in respect of goodwill of the firm and the same on his death subject to the overriding powers contained in clause 9 must absolutely be belonging to the surviving partners. The question to be considered is even though by reason of the provisions of clause 7 of the partnership deed the deceased or his legal representatives are not entitled to any compensation in respect of a share in the goodwill, whether the item of goodwill has to be taken into account in determining the liability for a levy of estate duty. The charging section is s. 5 of the Act and the relevant part thereof provides that in the case of every person dying after the commencement of the Act, there shall, save as hereinafter expressly provide, be levied and paid upon the principal value ascertained as hereinafter provided of all property, settled or not settled, which passes on the death of such person, a duty called 'estate duty' at the rates fixed in accordance with s. 35. If having regard to the provisions of clause 7 of the partnership deed the deceased's share in the goodwill upon his death passed to the surviving partners, then, under the provisions of s. 5 of the Act, the liability to pay estate duty will automatically arise. It is undoubtedly true that under clause 9 every overriding and drastic powers are conferred upon the head partner qua disposal of the goodwill, but so long as such powers are not exercised a moment prior to the death of the deceased all the partners including the deceased had shares in the goodwill in accordance with their respective rights to share the profits and bear the losses and hence the share of the deceased in the goodwill upon his death, rather than going to his legal representatives, devolved upon the surviving partners. It may be that the powers conferred under clause 9 may affect the valuation of the goodwill. It will not be possible to take the view that so far as the firm of M/s. Kotak & Co., was concerned, it had no goodwill or the value of the goodwill was almost nil. In our opinion, the Tribunal was in error in construing the provisions of clause 7(a) read with those of clause 9 of the partnership deed and in coming to the conclusion that the deceased had no interest in the goodwill immediately before his death. In the events that have happened in the present case having regard to the provisions of s. 5 or s. 7 of the Act, the deceased's share in the goodwill upon his death passed to the surviving partners. The value of the deceased's share in the goodwill of the firm is to be included in the dutiable estate having regard to the provisions of s. 5 and s. 7 of the Act. The E.D. authorities, in our opinion, were right in taking the view that the value of the deceased's share in the goodwill was includible in the dutiable estate though we are not concerned with the value to be put thereon. Accordingly, question No. 1 referred to above is answered in the affirmative and against the accountable person.

10. The view that has been taken by us in respect of question No. 1 is in consonance with the view that had been taken earlier by this court in Estate Duty Reference No. 6 of 1968, Smt. Urmila (widow of Champaklal J. Shah) v. CED (since reported in : [1980]122ITR958(Bom) ), decided by us on June 22, 1978. The relevant provision (in the partnership deed) in that case pertaining to the devolution of goodwill on the death of a partner was as under (p. 963):

'In case of death or retirement of a partner, the surviving partners or the continuing partners as the case may be shall be entitled to the goodwill of the partnership business without making any payment or compensation to the legal representatives of the deceased partner or to the retiring partner in respect of goodwill and the intention is that the goodwill shall accrue to and belong to the surviving or continuing partners without any valuation of or allowance for goodwill.'

11. Following the decision of the Madras High Court in the case of CED v. Ibrahim Gulam Hussain Currimbhoy : [1975]100ITR320(Mad) , we took the view that the share of the deceased in the goodwill of the firm was includible in the principal value of the property, under s. 5 of the Act.

12. That takes us to the question whether the view that has been taken by the estate duty authorities and the Tribunal in disallowing deduction in respect of an amount representing a portion of the penalty levied under the I.T. Act on the firm, of which the deceased was a partner, in determining the value of the property passing on the death of the deceased was correct. The liability to pay penalty arose under the following circumstances. The firm of Kotak & Co., had not declared certain transactions to the income-tax authorities for the assessment years 1947-48 to 1953-54 (both inclusive). Enquiries were started in relation to these transactions during the lifetime of the deceased. The firm applied to the ITO for settlement in regard to these transactions. Ultimately, on March 29, 1963, the Commissioner passed an order accepting the settlement in accordance with the terms set out by him in his order. The order of the Commissioner regarding settlement is dated March 29, 1963, and is annex. 'E' to the statement of the case. It is provided in this order that an income of Rs. 19,00,000 would be assessed as escaped foreign income for the years 1947-48 to 1953-54 as indicated in the said order. The order, inter alia, provided that penalty at 20 per cent of the tax on the income mentioned in the said order will be levied under s. 271(1)(c) of the I.T. Act, 1961. It is in respect of this payment of penalty that the accountable person claimed a deduction in respect of the sum of Rs. 26,312 being the portion of the penalty pertaining to the deceased's share in respect of the aggregate penalty payable by the firm. The claim for deduction in respect of the sum of Rs. 26,312 was rejected by the Asst. Controller on the ground that since the order imposing the penalty was passed after the date of death of the deceased, the liability to pay penalty arose for the first time after the death of the deceased. So far as the Appellate Controller was concerned, he confirmed the order passed by the Asst. Controller was concerned, he confirmed the order passed by the Asst. Controller. He noted the distinction that existed between a tax liability and a liability arising from an order of penalty. So far as the tax liability was concerned, it was a debt owed as soon as the income was earned, and even though the liability is not ascertained during the lifetime of the deceased still it is a debt which is capable of being determined and can be allowed as a deduction by way of debt. According to him, the penalty for concealment of income cannot be treated on the same footing. The question of levy of penalty depend upon the facts and circumstances of each case and even the question relating to the quantum of penalty can be determined only when the order is passed. He took the view that the penalty which is levied long after the date of death cannot be said to be a liability outstanding on the date of death. This view taken by the E.D. authorities has been confirmed by the Tribunal. The Tribunal pointed out in its order that the liability to pay a penalty could not possibly arise till the competent authority passed the order levying penalty for the year in question. Such an order was passed only in the year 1963 i.e., nearly two years after the death of the deceased and the Tribunal accordingly confirmed the order of the E.D. authorities disallowing deduction in respect of the proportionate amount qua penalty.

13. Under the Act there are some deductions which are permissible. Section 44 of the Act provides, that reasonable funeral expenses and with some exceptions, debts and encumbrances will be allowed to be deducted in determining the chargeable value of the estate. It provides that in determining the value of an estate for the purpose of estate duty, allowance shall be made for funeral expenses (not exceeding rupees one thousand) and for debts and encumbrances. The latter part of the section provides for certain specific debts which are not to be allowed. Under this provision, therefore, a deduction is permissible if an order imposing penalty passed almost two years after the death of the deceased can be regarded as a debt. In determining the question whether an amount payable by way of penalty is a debt or not, a well recognised distinction that exists between tax liability and penalty ought not to be overlooked. The question whether an amount payable by way of income-tax or super-tax in respect of a particular assessment year was a debt owed within the meaning of the W.T. Act, 1957, came up for consideration before the Supreme Court in the case of Kesoram Industries and Cotton Mills Ltd. v. CWT : [1966]59ITR767(SC) . The Supreme Court by a majority took the view that the word 'owe' meant 'to be under an obligation to pay', it did not really add to the meaning of the word 'debt', that the expression 'debt owed' within the meaning of s. 2(m) of the W.T. Act, 1957, could be defined as the liability to pay in praesenti or in future an ascertainable sum of money; that a liability to pay income-tax was a present liability though the tax payable after it was quantified in accordance with the ascertainable data. There was a perfected debt at any rate on the last day of the accounting year and not a contingent liability. The rate was always easily ascertainable. If the Finance Act was passed, it was the rate fixed by that Act, if the Finance Act was not yet passed, it was the rate fixed by that Act, if the the Finance Act was not yet passed, it was the rate proposed in the Finance Bill pending before Parliament or the rate in force in the preceding year, whichever was more favorable to the assessee. All the ingredients of a 'debt' were present; it was a present liability of an ascertainable amount. A large number of English as well as Indian authorities have been considered in this judgment and the ultimate decision has been summed up by the Supreme Court at page 780 in the following words:

'There is no conflict on the definition of the word 'debt'. All the decisions agree that the meaning of the expression 'debt' may take colour from the provisions of the concerned Act; it may have different shades of meaning. But the following definition is unanimously accepted:

'A debt is a sum of money which is now payable or will become payable in future by reason of a present obligation: debitum in praesenti, solvendum in futuro.'

The said decisions also accept the legal position that a liability depending upon a contingency is not a debt in praesenti or in futuro till the contingency happened. But if there is a debt the fact that the amount is to be ascertained does not make it any the less a debt if the liability is certain and what remains is only the quantification of the amount. In short a debt owed within the meaning of section 2(m) of the Wealth-tax Act can be defined as a liability to pay in praesenti or in futuro an ascertainable sum of money.'

14. Having regard to this test laid down by the Supreme Court, so far as the liability to pay income-tax liability on the escaped income of Rs. 19,00,000 was concerned, the income-tax liability will undoubtedly be a 'debt' within the meaning of the E.D. Act; but by the order of the Commissioner, the firm was called upon to pay 20 per cent. by way of penalty. That order was passed by the Commissioner on March 29, 1963, i.e., nearly two years after the death of the deceased. By this order 20 per cent of the tax on the incomes which are referred to as the income which escaped the assessment has been levied by way of penalty under s. 271(1)(c) of the I.T. Act, 1961. A liability qua penalty can arise only when an order imposing the penalty has been passed by the appropriate authority. Till then there is no liability qua penalty cannot be equated to or compared with a tax liability which is certain though it may be quantified at a later date. The relevant provisions of s. 271, at the appropriate time, inter alia, provided that if the ITO or the AAC in the course of any proceedings under this Act, is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty, in addition to any tax payable by him, a sum which shall not be less than twenty per cent. but which shall not exceed one and a half times the amount of the tax, if any, which would have been avoided if the income, as returned by such person,, had been accepted as the correct income. The amount of penalty that may be leviable can only be ascertained for the first time when an order is passed by the appropriate authority. This is not a case of a liability in praesenti, the amount whereof is ascertained in future. The liability arises for the first time when the order imposing the penalty is passed. Till such an order is passed, it is impossible for anybody to say as to what is the quantum of penalty which the defaulting party will be required to pay. Such being the nature of the penalty, the liability arose for the first time when the order was passed on March 29, 1963. Since this order was passed after the date of death of the deceased, it cannot be regarded as a debt due by the deceased at the time of his death. As it is not a debt due at the date of death of the deceased, under s. 44 of the E.D. Act, deduction in respect thereof will not be permissible and, in our opinion, the E.D. authorities and the Tribunal were right in rejecting the claim of the accountable person for a deduction in respect thereof. Accordingly, our answer to question No. 3 is in the negative and in favour of the revenue. The accountable person shall pay the costs of the reference.


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