1989 (7) TMI 93 - HC - Income Tax

Summary

Issues Involved:
1. Whether the share of the goodwill of a dissolved partnership firm forms part of the assets of the deceased partner.
2. Whether the court has the power to rectify clerical or inadvertent errors in its judgment.
3. The applicability of Article 141 of the Constitution in correcting judicial errors.

Issue-wise Detailed Analysis:

1. Goodwill as Part of Deceased Partner's Assets:
The core issue in the supplemental proceedings was whether the share of the goodwill of a dissolved partnership firm forms part of the assets of the deceased partner. Originally, the court had answered this question in favor of the accountable person, stating that the goodwill amounting to Rs. 9,450 did not form part of the estate of the deceased under the Estate Duty Act, 1953. However, it was later pointed out by the Company Law Institute of India Private Ltd. that this decision was contrary to the Supreme Court ruling in CED v. Mrudula Nareshchandra [1986] 160 ITR 342, which held that the goodwill of a firm on the death of a partner does not "evaporate or disappear" and should be quantified as part of the deceased's estate. The court acknowledged that its previous order was passed per incuriam, as the Supreme Court decision was not cited during the original debate.

2. Power to Rectify Clerical or Inadvertent Errors:
The court examined whether it had the power to correct clerical or inadvertent errors in its judgment. It referred to Section 152 of the Code of Civil Procedure, which allows for the correction of clerical or arithmetical mistakes in judgments, decrees, or orders. The court also drew parallels with the slip rule in England, which permits the correction of obvious errors under inherent powers. The Privy Council case of Piyaratana Unnanse v. Wahareke Sonuttara, Unnanse [1950 AC 561] was cited to illustrate that while courts generally become functus officio after pronouncing orders, they retain the inherent power to correct clerical mistakes.

3. Applicability of Article 141 of the Constitution:
The court deliberated on whether it could invoke Article 141 of the Constitution to correct its error. Article 141 states that the law declared by the Supreme Court shall be binding on all courts within the territory of India. The court noted that inherent powers cannot be invoked for amending the order, but under Article 141, it could correct the error. The court clarified that only Supreme Court judgments delivered before the date of its order are relevant for rectification. The court cited the Calcutta High Court decision in Surajmull Choteylal v. CIT [1978] 114 ITR 130, which held that subsequent Supreme Court decisions cannot be grounds for reviewing an order that was correct when made.

Conclusion:
The court concluded by following the Supreme Court decision in CED v. Mrudula Nareshchandra [1986] 160 ITR 342 and corrected its previous opinion delivered on August 11, 1988. The court answered the second question in favor of the Revenue and against the accountable person, indicating that the share of the goodwill of a dissolved partnership firm forms part of the deceased partner's estate. The court also invited the Revenue to place cases where the earlier order was followed for correction if deemed necessary.

Separate Judgment:
J. M. Srivastava J. concurred with the judgment.