2009 (11) TMI 97 - SC - Income Tax

Refund The deceased was a partner in a firm, which was engaged in the business of exporting tea. It exported tea to the U. S. S. R. - On the facts, Tribunal found that, at the relevant time, the market conditions in the U. S. S. R. were not congenial; that there was huge volatility in the tea export business; that export of tea had huge volatility even otherwise; and, in the circumstances, the Tribunal applied the multiplier of one year s purchase instead of three years purchase for evaluating the goodwill of the firm. Held that this aspect was a purre question of fact and the Supreme Court would not interfere - On the question as to whether the refund in question which became payable after the death, Tribunal and the High Court concurrently held that the refund had not become due (crystallised) on October 18, 1984, when V. G. Saraf passed away. In fact, on that day, the claim for refund under the Act was pending adjudication. Such refund stood determined only after the demise of the deceased. Hence, such refund cannot be considered to be a property available at the time of the death for the purpose of estate duty

Summary

Issues:
Valuation of goodwill and refund of income-tax in a partnership firm.

Valuation of Goodwill:
The case involved the valuation of goodwill in a partnership firm engaged in exporting tea. The Assistant Controller of Estate Duty applied the super profits method with a multiplier of three years' purchase, which was disputed by the assessee-respondent as excessive. The Income-tax Appellate Tribunal found market conditions unfavorable and applied a multiplier of one year's purchase instead. The Tribunal's decision was upheld by the High Court, emphasizing that the multiplier depends on business nature and market conditions. The Assistant Controller's calculation of super profits was challenged for using a lower interest rate than the return on capital employed, which was deemed incorrect by the Tribunal and High Court. The Supreme Court found the valuation of goodwill to be a factual issue and upheld the High Court's decision, dismissing the appeal.

Refund of Income-tax:
Regarding the refund of income-tax payable after the deceased partner's death, it was held that the refund did not crystallize before the partner's demise. The claim for refund was pending adjudication on the date of death and was determined only after the partner's passing. Citing a previous judgment, the court ruled that such a refund could not be considered as part of the deceased's property at the time of death. Consequently, the Tribunal and High Court's decision on the refund issue was upheld, leading to the dismissal of the appeal by the Supreme Court without costs.

Additional Appeals and Special Leave Petitions:
The Supreme Court also addressed multiple other appeals and special leave petitions, where the delay was condoned, and the dismissal was based on a previous order, Civil Appeal No. 8247 of 2004. These appeals and special leave petitions were consequently dismissed by the court.