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TMI Blog1990 (10) TMI 164X X X X Extracts X X X X X X X X Extracts X X X X ..... e correct estate duty which is to be determined as payable by the accountable person. 2. The facts pertaining to these issues may be stated as follows. Shri B.S. Venkatasubramania Iyer was one of the directors of the company from 1964. The company was incorporated in 1962. There was no dispute that the slice of the assets of the company which should form part of the estate of the deceased should be found out under section 17 of the Estate Duty Act. From 1964 to 1968 the deceased was paid remuneration at the rate of Rs. 1,000 only per month. However from 1969 to the date of his death he was allowed to draw a sum of Rs. 2,000 per month towards his remuneration from the company. The deceased died on 27-5-1972. There were four directors to the company and they are : S/Shri R.K. Lullah, N.M. Fakrudeen Saheb, B.V. Ramamoorthi and B.V. Rajagopal. Each one of the directors were paid a remuneration of Rs. 24,000 per year. The company was running 31 lorries, 7 buses and 7 cars by the date of death of the deceased, as can be seen frorm Annexure-11 to the assessment order, the written down value of which was returned at Rs. 9,18,565, whereas the Assistant Controller had determined the value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onalisation was talked about everywhere it would be highly difficult to conceive a transport company running route buses enjoying any goodwill and that too to an extent of Rs. 12,05,004. The learned departmental representative contended that the argument of the learned counsel for the accountable person is devoid of force. He contended that nationalisation of bus transportation was much talked about in public in and around the date of death of the deceased is not correct. Ordinances would be promulgated by the Government only as a sudden step and in order to take swift action and with a view to catch the concerned as unawares. Otherwise the legislature would be rest content by making an enactment instead of promulgating an Ordinance in the first instance replaced by an Act next following it. Further the general proposition sought to be canvassed on behalf of the accountable person that the transport business carried on by the assessee has no special significance and did not provide any special service or convenience to the public for which it would earn a fame and a name and it did not have the possibility of acquiring any goodwill, even though it was carrying on the business of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the ordinance on 14-1-1973 in that regard, that aspect would have only a small impact in the computation of the goodwill of the company because, the company, as annexure-II to the estate duty assessment order discloses, was running 31 lorries, 7 cars and 7 buses. Only buses would have route permits. The nationalisation of bus transport would have effect only on the buses but would have no effect at all either on the lorries or on the motor cars run by the company. The Assistant Controller of Estate Duty had taken three years' super profits earned by the company as representing the goodwill of the company and he computed the same at Rs. 12,05,004. But this was reduced to two years' purchase of super profits, in the appeal, by the learned Appellate Controller and the computation of the goodwill was reduced to Rs. 8,03,336. The reduction granted by the Appellate Controller, in our considered opinion, would sufficiently take care of the depressing effect on the goodwill of the company in this case, resulting from the general feeling in the public, about the imminent likelihood of bus nationalisation, even by the date of death of the deceased, on 27-5-1972. Having regard to the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also cannot be applied to the facts on hand. 4. The Madras High Court in Seethalakshmi Ammal's case while defining the concept of goodwill and considering the qualities of goodwill held as follows in the headnote of the decision at page 318 : "Goodwill is the magnetic quality of a particular trade or business which attracts custom to it as a matter of course. This quality springs from and is developed by various contributing factors that earn a reputation for honest dealing, quality and standard. It is founded on the belief and faith of the customer and is commonly built up in relation to a particular type of manufacture or production of articles identified by a trade mark which becomes widely known to the public and by which the custom takes it for granted that it represents what they wish for. The standing of the business, the personalities who are engaged in the business, the location in which it is carried on and the like are contributing factors of goodwill. Where a business involves no indistinguishable features and deals in standard articles manufactured by someone else which one can get from anywhere, not merely from a particular dealer, there is hardly any possibility of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hand cited a later Madras High Court decision in K. Balasubramania Nair v. CIT [1979] 119 ITR 504 for the proposition that route permits were not self-generating assets and some cost would have been incurred for its acquisition and capital gains would result from the sale of route permit. So also the learned departmental representative cited before us the Madras High Court decision in CIT v. Shri Venkateswara Bus Union [1979] 119 ITR 507 for the same proposition laid down in the first of the cases cited by him, which is already adverted to by us. The two cases cited by the learned departmental representative would only prove that the route permits obtained by the company, on which it was running seven buses, should not be deemed to be self-generating assets but they should be considered as assets involving some purchase price and the sale of such route permits necessarily results in capital gains. Therefore when buses are sold along with route permits it is quite likely that the payment would not only be made towards purchase of the buses but considerable amount would also be paid towards purchase of route permits accompanying the said buses. We, therefore, hold that the learned A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at no part of the remuneration paid to the directors of the company was ever held to be high and no disallowance of any part of such remuneration was made under the provisions of section 40A(2) of the Income-tax Act. Thus it is clear that when no remuneration was considered to be excess remuneration paid to any of the directors and when that was the position of the department how can it take a different position in the estate duty proceedings of one of the directors of the said company ? This argument appears to us to be quite tenable and convincing. Further we cannot subscribe to the view that there would be no possibility for all the four directors to involve fully in the management of the company. According to the Appellate Controller the work of the directors should only be considered to be part time but not full time having regard to the size of the company. According to the learned Appellate Controller it is only a medium size company. The learned counsel for the accountable person contended that each of these observations are unwarranted. We agree with this contention in view of the fact that the company was running 31 lorries, 7 buses and 7 motor cars. Motor lorry service a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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