( 1. ) THIS reference under the E. D. Act is a sequel to the death of one Gulamally Akbarally on 1st August, 1960, leaving behind him his widow, three sons and four daughters. There are three questions raised in this reference and it will be convenient to take each question separately. The first question runs as follows :

"whether, on the facts and circumstances of the case, the disallowance of the debts amounting to Rs. 22,820 due to the two sons of the deceased under Section 46 (1) of the Estate Duty Act, is valid in law ?"

( 2. ) THE facts relating to this question are : The deceased was the owner of a house property bearing No. 19, Venkatachala Mudali Street, Park Town, Madras. On 24th August, 1951, he executed a deed of gift settling this property in favour of his two sons, Abdulla and Abbas, who were then minors aged 13 years and 4 years respectively. The gift was accepted by their guardian the donor himself. The property was valued for the purpose of stamp duty at Rs. 77,100.

( 3. ) THE donees (through their guardian) realised the rent from this property from the tenants and deposited various amounts out of such rent realisations in the proprietary concern of the deceased. At the time of the death of the deceased the amount standing to their credit came to Rs. 22,820.

( 4. ) THE accountable persons claimed that this amount represented a debt due from the estate of the deceased so as to be deductible under Section 44 (a) of the Act. The Asst. Controller rejected this claim relying on Section 46 (1) (b) of the Act. The Appellate Controller confirmed the disallowance. On further appeal, the Appellate Tribunal felt that Section 46 (1) (a) was applicable to the debt in question. The amount of loan had been advanced out of the rent collected by the two sons from the property gifted by their father to them and, therefore, in the view of the Tribunal, the value of the consideration of the debt could be taken to be the property derived from the deceased, which brought it within the scope of Section 46 (1) (a) itself. Before the Tribunal reliance was placed on the proviso to Section 46 (1 ) (b) on behalf of the accountable person. The Tribunal observed that the proviso was to the effect that if the value of the consideration of the debt exceeded that which could have been rendered available by application of all the property derived from the deceased, then no abatement was to be made in respect of the excess. As the value of the property gifted was Rs. 77,100 in this case, the Tribunal considered that the loan in question, being only Rs. 22,820, was not eligible for any abatement contemplated by that provision. The accountable person has sought reference of the above question already set out on the above facts.

( 5. ) THE learned counsel for the accountable person contended that this is a case where Section 46 (1) (a) of the Act did not apply and that, if at all, Section 46 (1) (b) would have applied. He tried to bring the case within the scope of the proviso to Section 46 (1) (b) if that provision is taken to apply. The endeavour of the learned counsel for the Revenue was to show that it was unnecessary to go into Section 46 (1) (b) or to consider the effect of the proviso on the facts heroin and that the present case squarely came within Section 46 (1) (a) of the Act.

( 6. ) SECTION 5 of the E. D. Act contemplates levy of estate duty upon the principal value ascertained in accordance with the provisions of the Act of all the property which passed on the death of every person, who died after the commencement of that Act. Sections 6 to 16 provide for the properties that are deemed to pass on the death of a person. With reference to the principal value so ascertained in accordance with the provisions of this Act, deductions are contemplated by Section 44. Section 44 provides that in determining the value of an estate for the purpose of estate duty, allowance is to be made for funeral expenses not exceeding Rs. 1,000 and for