In order to apply the provisions of section 46(1)(b) of the Estate Duty Act, the Department should establish that there is a nexus between the loan transaction and the property derived from the deceased.

THANIKKACHALAM J.

In this reference under section 64(1) of the Estate Duty Act, 1953 (hereinafter referred to as "the Act"), the Tribunal has referred the following two question for our opinion at the instance of the Revenue :

"1. Whether, on the facts and in the circumstances case, the Appellate Tribunal was justified in holding that the sale proceeds of the house property credited in the books of the firm is in the nature of a trust and hence it does not form part of the assets of the firm ?

2. Whether, on the facts and in the circumstances of the case and having regard to the provisions of sections 46(1) and 46(2) of the Estate Duty Act, the Tribunal was justified in excluding the sum of Rs. 2, 923 and Rs. 47, 077 from the principal value of the estate ?" *

The first question pertains to the exclusion of Rs. 17, 761 while computing the principal value of the half share of the deceased in the partnership firm, M/s. Manilal and Sons. The said amount represented the credit balance in the charity account in the books of the partnership firm. The Assistant Controller came to the conclusion that the credit balance was not a real liability and it should be added while evaluating the deceased's half share in the profits of the firm. On appeal, the Appellate Controller held that the partnership firm had full control over the amounts till such time they were disbursed or utilised for charitable purposes and hence the Assistant Controller was justified in including the same while evaluating the deceased's half share in the profits of the partnership firm, M/s. Manilal and Sons. Aggrieved, the accountable person filed an appeal before the Tribunal and contended that a property at Purasawalkam was sold on May 13, 1944, for Rs, 71, 111 and the profit on the same property was credited to the charity account even during the lifetime of the father of the accountable person and the amount was being utilised for charitable purposes and the credit balance in the charity account cannot, therefore, be included, while evaluating the deceased's half share in the partnership firm, M/s. Manilal and Sons.The Revenue contended that since the deceased had a disposable interest in the funds, the amount has been rightly included in the estate of the deceased. However, the Tribunal held that when the deceased's father credited the profits of the property sold on May 13, 1944, he did so for a specific purpose and thereby imposed an obligation on the deceased to utilise it for charitable purposes, and it, therefore, follows that the legal ownership of the fund vested in the trust and the amount cannot be included in the dutiable estate of the deceased.

Before us, learned standing counsel appearing for the Department contended that this was not a real liability and the credit balance in the charity account in the books of the firm, Manilal and Sons, formed part of the real assets of the firm. Further, learned standing counsel pointed out that the partnership firm was having control over these amounts till such time they are disbursed or utilised for charitable purposes. Therefore, it was submitted that these amounts should also be included while ascertaining the principal value of the estate of the deceased. On the other hand, learned counsel appearing for the accountable person submitted that the credit balance in the firm's books represent the sale proceeds of a building. According to learned counsel for the accountable person, the father of the accountable person sold a building at Purasawalkam to Jalukiya Bivi and Aisha Bivi on May 13, 1944, and the profit from the sale of the house was created to a charity account in the books of the partnership firm and the amount so credited was being utilised for charitable purposes. Therefore, according to learned counsel for the accountable person, the deceased had no dominion over the said amount. Thus, learned counsel for the accountable person submitted that the Tribunal was correct in deleting the inclu