1985 (9) TMI 87 - HC - Income Tax

Summary

Issues: Inclusion of goodwill in the estate of a deceased partner for estate duty assessment.

Analysis:
The case involved a reference under section 64(1) of the Estate Duty Act, 1953, regarding the inclusion of the value of goodwill in the estate of a deceased partner. The deceased was a partner in a firm, and the question arose whether the share in the value of the goodwill should be included in the estate passing on the death of the partner. The Assistant Controller of Estate Duty had added the value of the goodwill to the estate, leading to an appeal by the accountable person, who argued that goodwill was not an asset passing on death. The Appellate Controller modified the quantum of goodwill but upheld its inclusion in the estate. Both the assessee and the Revenue appealed to the Appellate Tribunal, which relied on a decision of the Punjab and Haryana High Court to exclude the value of goodwill from the estate. However, a subsequent Full Bench decision of the same High Court clarified that goodwill is indeed an asset passing on death.

The main issue was whether goodwill should be considered an asset included in the estate of a deceased partner for estate duty assessment purposes. The Tribunal's decision, based on the earlier Punjab and Haryana High Court ruling, was overturned by a subsequent Full Bench decision of the same High Court, which explicitly stated that goodwill is an asset of a firm that passes on the death of a partner. The Full Bench emphasized that goodwill is capable of being valued and should be included in the estate for estate duty assessment. Therefore, the Tribunal's decision to exclude the value of goodwill from the estate was deemed incorrect in law.

The Tribunal did not address the specific value of the goodwill or whether the firm in question possessed goodwill. These matters were left undecided by the Tribunal and were directed to be determined in subsequent proceedings. The reference was disposed of by answering the initial question in the negative, in favor of the Revenue and against the assessee. No costs were awarded, and the order was to be transmitted to the Income-tax Appellate Tribunal for further action.