1982 (7) TMI 41 - HC - Income Tax

Summary

Issues:
1. Taxability of deceased's shares in the goodwill of two firms.
2. Inclusion of gifted amount in the deceased's estate value.

Analysis:
The judgment pertains to a reference under section 64(1) of the E.D. Act, 1953, involving the taxability of the deceased's shares in the goodwill of two firms. The first issue raised was whether the Tribunal was correct in excluding the deceased's shares in the goodwill of the firms of M/s. Shiv Shakti Silk Mills and M/s. Universal Dyeing and Printing Works from the estate value. The Tribunal held that the deceased, having retired from one firm before his death and not being able to transfer or dispose of the goodwill, it should not be included in the estate. However, in the case of the other firm, the Tribunal found that the deceased, though a partner till death, could not dispose of the goodwill as it was part of the firm's assets and not a separate property.

Regarding the deceased's share in the goodwill of M/s. Universal Dyeing and Printing Works, it was established that since the deceased had retired before his death and did not have the right to transfer the goodwill, it should not be included in the estate value. The argument that the goodwill was gifted to continuing partners was not entertained as it was not raised during the Tribunal proceedings and lacked legal basis. The judgment emphasized that the deceased's entitlement to any amount on his goodwill share was not proven and could not be assumed without proper investigation.

On the deceased's share in the goodwill of M/s. Shiv Shakti Silk Mills, the Tribunal had excluded the value of the goodwill from the estate, citing the inability of the deceased to dispose of it during his lifetime. However, a precedent case highlighted that the goodwill of a firm is part of its assets and should be considered collectively with other assets for valuation purposes. Therefore, the Tribunal's decision to exclude the deceased's share in this firm's goodwill was deemed incorrect.

In conclusion, the judgment affirmed that the deceased's share in the goodwill of M/s. Universal Dyeing and Printing Works should not be included in the estate value, but the share in the goodwill of M/s. Shiv Shakti Silk Mills should be included. The second issue regarding a gifted amount was resolved in favor of the assessee. As both parties achieved partial success, no costs were awarded.