1985 (9) TMI 114 - AT - Income Tax

Summary

Issues:
1. Valuation of goodwill for estate duty purposes based on partnership deed provisions.
2. Interpretation of partnership deed clauses regarding the valuation of goodwill.
3. Comparison of decisions from different High Courts regarding the passing of goodwill on death of a partner.
4. Determination of fair market value of goodwill for estate duty purposes.

Analysis:
1. The judgment concerns the valuation of goodwill for estate duty purposes based on the provisions of a partnership deed following the death of a partner. The deceased partner held exclusive rights to the goodwill, trade name, and tenancy rights as per the partnership deed.
2. The Assistant Controller rejected the argument that the value of goodwill should not exceed Rs. 50,000 based on the partnership deed clause, stating that the market value at the time of death should be considered, citing the decision of the Privy Council in a similar case.
3. The appeal filed by the accountable person contended that the value of goodwill passing to legal heirs should be limited to Rs. 50,000, as per the partnership deed clause. However, the Controller upheld the inclusion of the entire value of goodwill in the estate duty calculation, citing precedents from the Gujarat High Court.
4. The Tribunal relied on the Privy Council decision, emphasizing that the market value of goodwill at the time of death should be included in the estate duty calculation, regardless of any restrictions in the partnership deed. The Tribunal dismissed the argument that the deceased had no interest in goodwill during his lifetime, emphasizing the importance of fair market value for estate duty purposes.
5. The Tribunal distinguished the Gujarat High Court decisions cited by the accountable person, highlighting that the restriction in the partnership deed was on the value of goodwill, not on its passing to legal heirs. The Tribunal concluded that the fair market value of goodwill at the time of death should be included in the estate duty calculation, rejecting the argument to restrict its value to Rs. 50,000.
6. Ultimately, the Tribunal held that the fair market value of goodwill at the time of death was includible in the estate duty calculation, emphasizing that there was no legal basis to limit its value to Rs. 50,000 based on the partnership deed provisions. The appeal was dismissed.