1983 (3) TMI 96 - AT - Income Tax

Summary

Issues:
1. Inclusion of deceased's share of goodwill in the firm UBM Sales & Services in the principal estate.
2. Interpretation of provisions of section 27 of the Estate Duty Act, 1953.
3. Applicability of Explanation 2 to section 2(15) of the Estate Duty Act.
4. Determination of whether deceased's share of goodwill constitutes a disposition or gift.
5. Assessment of quantum of deceased's share of goodwill in the firm.
6. Dispute over whether the deceased's share of goodwill should be included in her principal estate.

Analysis:

Issue 1:
The case revolves around the inclusion of the deceased's share of goodwill in the firm UBM Sales & Services in her principal estate. The Assistant Controller asserted that the deceased's share of goodwill was a gift made within two years of her retirement, thus includible in the estate.

Issue 2:
The Commissioner (Appeals) upheld the inclusion of goodwill, citing provisions of section 27 of the Estate Duty Act, which deems property passed under a disposition made by the deceased. He emphasized that the deceased's failure to claim her share in the goodwill constituted a disposition.

Issue 3:
The Commissioner (Appeals) referred to Explanation 2 to section 2(15) of the Act, stating that the extinguishment of the deceased's right in the goodwill of the firm amounted to a disposition in favor of relatives without consideration, qualifying as a gift under the Act.

Issue 4:
The accountable person argued against the inclusion of goodwill, contending that no disposition was made, and the deceased had no rights in the firm at the time of death. The Tribunal held that the deceased's retirement before death precluded any disposition of her share of goodwill, thus excluding it from the principal estate.

Issue 5:
The Tribunal assessed the quantum of the deceased's share of goodwill, reducing it from the Assistant Controller's determination to a lower amount based on the facts and arguments presented by the parties.

Issue 6:
The Tribunal ultimately concluded that the lower authorities were unjustified in including the deceased's share of goodwill in her principal estate, directing the deletion of the amount initially determined. The decision was based on the timing of the deceased's retirement and the lack of evidence of any disposition of goodwill.

In conclusion, the Tribunal partly allowed the appeal, ruling in favor of the accountable person by excluding the deceased's share of goodwill from her principal estate.