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TMI Blog1991 (4) TMI 211X X X X Extracts X X X X X X X X Extracts X X X X ..... It is common ground that he was a partner in the said firm in his capacity as the karta of the HUF consisting of himself and his six sons. 3. It is also common ground that the said deceased retired from the firm on 16-4-1981. 4. On 27-1-1982 the accountable person filed the estate duty return relating to the estate of the said deceased, disclosing the principal value of the estate at Rs. 3,68,339. The Assessing Officer applied his mind, inter alia, to two issues, namely (i) the share of the said deceased in the goodwill of the said firm and (ii) the share of the said deceased in the closing stock of the said firm. 5. As respects the goodwill, the Assessing Officer found that the value of the share of the said deceased in the goodwill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the date of his death the deceased was not a partner of the firm and, hence, there was no question of bringing to charge the share of the said deceased in the goodwill of the firm. In this regard he referred to and relied upon the following cases : CED v. S. Kuppuswami [1981] 131 ITR 709 (Mad.), CED v. G.H. Malhotra [1983] 144 ITR 925 (Bom.), Smt. Urmila v. CED [1980] 122 ITR 958 (Bom.) and Kamala Devi Jhawar v. ACED [1983] 5 ITD 137 (Cal.). 10. As regards the addition made consequent on the revaluation of the closing stock as on the date of retirement of the said deceased, Shri Rajaraman contended that there was no case for making the impugned addition. 11. On his part, Shri P.A. Iyengar, the learned Departmental Representative, stron ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exception to the principle at (iii) above is a case where the deed of partnership contains a term to that effect. (v) The principle at (iii) above is not in any way diluted or overridden simply because the partnership deed contained a term to the effect that the partnership shall continue notwithstanding the death of a partner. This is because in the absence of a specific term in the deed of partnership to that effect, the Partnership Act does not operate to extinguish the proprietary right of a partner in the assets of the firm (including goodwill). This is because, as pointed out by the Supreme Court in the case of Khushal Khemgar Shah : " In interpreting the deed of partnership, the Court will insist upon some indication that the right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of the Indian Partnership Act shall apply. " 18. As pointed out earlier, no deed of retirement was drawn up when the deceased retired from the firm on 16-4-1981. On May 20, 1981 the six sons of the deceased became partners of the firm and they shared equally the 1/4th share, which earlier belonged to their father. Apart from adverting to the fact of the said deceased having retired from the partnership due to ill-health on 16-4-1981 and to the further fact that the six sons of the said deceased became partners, the deed dated May 20, 1981 is almost identical with the earlier deed dated June 18, 1962. 19. A couple of points readily suggest themselves. The deed dated June 18, 1962 is absolutely silent on the question of goodwill. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on the basis of an implied concession on the part of the Departmental Counsel that the deceased did not have any share in the goodwill of the firm. Secondly, the Court held : ". . . the said deceased did not have any share in the goodwill of the firm at the time of his death as he has already retired prior to his death from the firm and, hence, there was no question of his having any right to dispose of his share in the goodwill of that firm at the time of his death ". A couple of points may here be made. The short report does not set out the terms and conditions of the retirement of the deceased. Secondly, the statement that the deceased did not have any share in the goodwill of the firm from which he retired merely because he had alr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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