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Issues:
1. Inclusion of deceased partner's share in the goodwill of the firm in the principal value of the estate for estate duty calculation. 2. Interpretation of partnership deed clauses regarding the passing of goodwill to legal representatives upon the death of a partner. Analysis: The judgment delivered by the High Court of Karnataka pertains to the inclusion of a deceased partner's share in the goodwill of a firm for estate duty calculation. The case involved a partner who passed away, leaving behind a share in the firm's goodwill. The Assistant Controller of Estate Duty computed the deceased partner's share in the goodwill, which was contested by the accountable person, the deceased partner's son. The Appellate Controller and the Income-tax Appellate Tribunal upheld the inclusion of the goodwill share in the estate value, leading to the accountable person challenging the decision in court. The accountable person argued that unless the firm was dissolved, the value of the goodwill should not pass on to the legal representative of the deceased partner. Reference was made to a judgment by the Gujarat High Court, emphasizing the importance of partnership deed clauses in determining the passing of goodwill. However, the Tribunal relied on a decision by the Madras High Court, which held a different view regarding the passing of goodwill in such cases. The High Court analyzed the partnership deed clauses in the present case and distinguished it from the cases considered by the Gujarat and Madras High Courts. It was noted that there was no clause in the partnership deed restricting the deceased partner's legal representative from claiming a share in the goodwill. Referring to the Partnership Act, the court highlighted that goodwill is considered a firm's asset and should be included in the estate unless specified otherwise in the partnership agreement. Citing the Supreme Court's interpretation of the Partnership Act, the High Court emphasized that in the absence of an express stipulation in the partnership deed, the legal representative of the deceased partner is entitled to a share in the goodwill. As there was no clause in the present case barring the deceased partner's legal representative from the goodwill share, the court held that the value of the goodwill passed on to the accountable person and was liable for estate duty under the Act. In conclusion, the High Court ruled in favor of including the deceased partner's share in the goodwill of the firm in the estate value for estate duty calculation. The judgment clarified the importance of partnership deed clauses and highlighted that in the absence of specific restrictions, the legal representative is entitled to the deceased partner's share in the goodwill.
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