1981 (9) TMI 177 - AT - Income Tax

Summary

Issues: Valuation of goodwill in estate assessment.

In this case, the deceased was a partner in a firm engaged in commission agent business. The assessment of his estate included the value of his share in the firm's goodwill, which was calculated based on three years' purchase after allowing for interest on capital and partners' salaries. The accountable person, while not objecting to the inclusion of the goodwill value, contested the multiple used for valuation. The Zonal Appellate Controller directed the value to be calculated using two years' purchase instead of three. The accountable person, during the appeal, argued for the adoption of one year's purchase multiple based on the deceased's age, declining business trend post his death, and the nature of the business. The Departmental Representative cited legal precedents and argued that the two years' purchase valuation was reasonable considering the deductions already allowed for interest and salaries. The Tribunal considered the arguments and legal precedents presented, emphasizing the need to determine goodwill value based on the specific circumstances of each case. Ultimately, the Tribunal decided to value the goodwill at 1.5 times the annual profits after deductions, differing from both the initial assessment and the Zonal Appellate Controller's decision. The appeal was partly allowed based on this valuation decision.