1987 (8) TMI 56 - HC - Income Tax

Summary

Issues:
Interpretation of disposition made by deceased in favor of a relative upon retirement from a partnership and applicability of sections 9 and 27 of the Estate Duty Act.

Detailed Analysis:
The case involved a reference under section 64(1) of the Estate Duty Act, 1953, regarding the estate of a deceased individual who was a partner in a firm. The main question was whether there was a disposition made by the deceased in favor of a relative when he retired from the partnership, and if the provisions of section 9 read with section 27 were applicable.

The deceased was a partner in a firm with a 50% share and retired from the partnership, leaving the firm with two other partners. Subsequently, the firm was reconstituted by adding three new partners who were grandchildren of the deceased. The issue focused on whether the share of the deceased in the firm's goodwill could be added to his estate for estate duty purposes.

The Appellate Controller of Estate Duty and the Tribunal concluded that there was no disposition made by the deceased in favor of a relative, specifically the grandchildren who became partners after the reconstitution of the firm. The Tribunal's decision was based on the partnership agreement clause, which stated that upon retirement, the goodwill of the partnership would belong to the surviving partners, without any specific disposition to the deceased's relatives.

The High Court agreed with the Tribunal's decision, emphasizing that the partnership agreement clearly outlined the treatment of goodwill upon retirement, indicating no specific disposition to the deceased's grandchildren. Therefore, the provisions of sections 9 and 27 of the Act were deemed not applicable in this case.

In conclusion, the High Court upheld the Tribunal's decision, ruling that there was no disposition by the deceased in favor of any relative upon retirement from the partnership. The judgment favored the assessee against the Revenue, with no order as to costs. The court directed the transmission of the judgment to the Assistant Registrar, Income-tax Appellate Tribunal, Patna.