1983 (3) TMI 11 - HC - Income Tax

Summary

Issues:
1. Validity of reopening the assessment under section 59(b) of the Estate Duty Act.
2. Ownership of the entirety of the goodwill of the firm by the deceased partner.
3. Exclusion of income-tax payable or paid in arriving at the super profits of the firm for computing the value of its goodwill.

Analysis:
The judgment delivered by the High Court of Kerala pertains to a reference made under section 64 of the Estate Duty Act, 1953, involving three key questions. The first issue addressed the validity of reopening the assessment under section 59(b) of the Act. The deceased partner was a part of a firm, M/s. Pulavar Shoe Mart, and the assessment was reopened based on an audit note suggesting that the entire goodwill of the business belonged to the deceased. The Assistant Controller directed the inclusion of the full value of the goodwill in the estate assets, leading to a revised value of the estate. The Tribunal upheld the reopening based on the audit note, prompting a detailed analysis by the High Court.

The second issue revolved around the ownership of the goodwill of the firm, with the partnership deed stipulating that in case of any change in the firm's constitution or dissolution, the working partners would not be entitled to any share in the goodwill. The assessment initially considered 40% of the goodwill as the deceased's share, but the audit raised concerns leading to the reopening of the assessment. The Appellate Controller and the Tribunal did not accept the contention that the entire goodwill belonged to the deceased, necessitating a thorough examination by the High Court.

The final issue involved the treatment of income-tax payable or paid in determining the super profits of the firm for valuing its goodwill. The appellant argued that income tax should be excluded from the computation, but this contention was rejected by the Appellate Controller and the Tribunal. The High Court highlighted the interdependence of these issues, emphasizing that the resolution of the first question would impact the subsequent considerations. The Court directed the Income-tax Appellate Tribunal to reevaluate the matter comprehensively in light of the judgment and considerations presented, ensuring a holistic review of the case. Additionally, the Court declined to grant a certificate for appeal to the Supreme Court, underscoring the finality of the decision at the High Court level.