728/CBDT. - Income Tax - 728/CBDT

INSTRUCTION NO. 728/CBDT Dated : August 3, 1974 The Gujarat High Court had an occasion to consider the question of inclusion of interest of the deceased in goodwill of the firm in Estate Duty assessment. In the case of Mridula Nareshchandra Vs.Controller of Estate Duty Gujarat, in (Estate Duty Reference No.3 of 1970 decided in June, 1973), the Gujarat High Court held that the value of the deceased's interest in the goodwill of the firm was not includible in the estate because the clause (10) of the Partnership Deed provided that on the death of any of the partners, the firm would not stand dissolved and the legal heirs of the deceased partner would have no right in the goodwill of the firm. Similarly, the case of Shri Shantilal Nemchand Vs CED Gujarat (E.D.Ref.No.10 of 1971), the deceased was a partner in a firm the partnership deed of which laid down that the firm would not get dissolved on death or retirement of any of the partners and that no retired partner or the heir of the deceased partner would have any right in the goodwill of the firm. In this case also the Gujarat High Court held that the value of the deceased's interest in the goodwill of the firm was not includible in the estate. 2. The Board have not accepted both these decisions and petitions for leave to appeal to the Supreme Court have been filed. The Board are advised that in case where the Partnership Deed provides that the heirs of the deceased partners are not entitled to any share in the goodwill of the firm, it can be held that the other partners stand to benefit by reason of the cessor of interest of the deceased partner in the goodwill. Hence, the value of interest of the deceased in the goodwill of the firm has to be included in the estate of the deceased. 3. These instructions may be followed by all the Officers in charge other than the charges in Gujarat. The instruction may be brought to the notice of the officers working in the charge.