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Issues Involved:
1. Inclusion of the deceased's share in the goodwill of three firms in the principal value of the property under the Estate Duty Act, 1953. 2. Correctness of the valuation of the goodwill of the three firms. Detailed Analysis: Issue 1: Inclusion of the Deceased's Share in the Goodwill of Three Firms Goodwill of M/s. Natwarlal & Co.: The Tribunal held that the deceased's share in the goodwill of M/s. Natwarlal & Co. passed on his death and became liable to estate duty under Section 5 of the Estate Duty Act. The court agreed with this conclusion, noting that Clause 13 of the partnership deed clearly contemplates devolution of the share of the deceased in all the assets, including goodwill, to the continuing partners. This devolution occurs without any payment for the goodwill to the legal representatives of the deceased, thus bringing the case within the meaning of Section 5. Goodwill of M/s. Kantilal Manilal & Co. and M/s. Pannalal Brothers: The Tribunal initially included the deceased's share in the goodwill of these firms under Section 9, asserting that there was a relinquishment of rights without consideration. However, the court found this reasoning flawed. The court held that the relinquishment of the deceased's share in the assets, including goodwill, was accompanied by the continuing partners taking over the liabilities of the firm. This mutual exchange of rights and obligations constituted valid consideration, thus negating the application of Section 9. Consequently, the deceased's share in the goodwill of these two firms should not be included in the principal value of the property. Issue 2: Correctness of the Valuation of the Goodwill Goodwill of M/s. Natwarlal & Co.: The Tribunal adopted a valuation method based on three years' purchase price on the basis of average maintainable profit of five years, excluding the year in which the death or retirement occurred. The court upheld this method, agreeing with the Tribunal's rejection of the argument that only returned profits should be considered. The court affirmed that assessed income, not returned income, should be the basis for valuation, and it should be the income finally determined. The court found no reason to interfere with the Tribunal's conclusion on the quantification of the goodwill. Conclusion: Question No. 1: - The share of the deceased in the goodwill of M/s. Natwarlal & Co. was includible in the principal value of the property under Section 5 of the Estate Duty Act. - The share of the deceased in the goodwill of M/s. Kantilal Manilal & Co. and M/s. Pannalal Brothers was not includible in the principal value of the property under Section 9 read with Explanation 2 to Clause (15) of Section 2 of the Estate Duty Act. Question No. 2: - The goodwill of M/s. Natwarlal & Co. was valued on correct legal principles. The parties will bear their own costs of the reference.
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