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TMI Blog1983 (2) TMI 143X X X X Extracts X X X X X X X X Extracts X X X X ..... eceased's share in the goodwill 'on the ground that it is a common business of construction'. Observing that the firm had 'earned good name in the construction business and is reflected in the profits earned by it at an average over Rs. 1,25,000. The profits so earned are 20 per cent considering the closing capital of the partners'. The Assistant Controller considered it proper to assess the value of the deceased's 20 per cent share in the goodwill at Rs. 52,500 and included the same in the principal value of the estate along with the deceased's credit balance of Rs. 31,542 as disclosed in the relevant balance sheet of the firm and concerning which there is no dispute. On appeal against this inclusion of Rs. 52,500, said Mr. Trimal, the Appellate Controller observed that 'the contention of the appellant has to be accepted that there cannot be any addition of the goodwill as there is specific provision in the partnership deed, that there is no goodwill 'on the death or the retirement of the partner'. In coming to this decision the Appellate Controller accepted the submission of the accountable person's representative that the Gujarat High Court decision in CED v. Babubhai Harjivanda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtnership business without making any payment or compensation to the legal representatives of the deceased partner in respect of goodwill and the intention is that the goodwill shall accrue to and belong to the surviving ... partners without any valuation of or allowance for goodwill. . . ." That clause contemplated computation of the share of the deceased in all the assets including the share in the liabilities, the share of the deceased in the goodwill of the firm was includible in the principal value of his estate under section 5 of the Estate Duty Act, 1953 ('the Act'). Mr. Trimal pointed out that in the subsequent decision in Kotak's case, concerned with a clause similar to the clause as in Urmila's case, the Bombay High Court held : ". . The deceased's share in the goodwill of the firm did not go to his legal representatives but devolved on the surviving partners. The value of the deceased's share in the goodwill of the firm had to be included in his dutiable estate having regard to the provisions of section 7 of the Estate Duty Act, 1953." It was Mr. Trimal's case that in the instant case, properly understanding the partnership as a whole, it must follow that the decea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be reversed. 5. Now, on this issue specifically Mr. Trimal brought to our notice paragraph 5 of the Bombay High Court's decision in Malhotra's case and pointed out the observations thus : " . . . we find that the question is really concluded against the assessee by the decision of this Court in CED v. Fakirchand Fatehchand Sachdev [1982] 134 ITR 268 (Bom.). In that case, it has been held that the charging provisions and the computation provisions in the Estate Duty Act, 1953, constitute an integrated scheme, and if in a given case it is not possible to compute the value of a particular property passing on death, then that property does not become exigible to the charge of estate duty. It has been further held that the goodwill of a firm is one of the properties or assets of a firm. Merely because it is an intangible asset, it does not stand on a different footing from the tangible assets of the firm, but in making up the final accounts it is to be taken together with the other assets of the firm in arriving at the value of the total assets and for deducting therefrom the liabilities as provided by law and in paying to the partners their share in the balance so arrived at. Whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated that there was no such nomination effected by the deceased. It was further explained by Mr. Gadgil that the five partners of A.V. Bhat Co. belonged to three different families unrelated to each other such that the first Shri Ashok Vinayak Bhat is the son of the fifth Smt. Kamalabai Vinayak Bhat and the second Shri Sharadchandra Krishna Belvalkar is the brother of the fourth Shri Sadananda Krishna Belvalkar and the deceased was partner No. 3 Smt. Sunanda Soumitra Gosavi. Mr. Gadgil further stated that on the death of the deceased the remaining 4 partners continued the business as equal partners so that the share of each of the continuing partners which earlier was 20 per cent stood enhanced to 25 per cent in the property of the firm. 7. At the outset of his submissions, Mr. Gadgil fairly pointed out that the Appellate Controller relied wholly on the provisions of clause 13 of the partnership deed. It was Mr. Gadgil's submission that the relevant clauses are clauses 13, 15 and 16. Mr. Gadgil also added that clause 14 also had some relevance. Since our attention was specifically drawn to clause 13 and we drew the attention of the parties to clause 15 to which we have made a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Controller's decision was correct even on the basis of the assumption that clause 13 was not applicable. In the circumstances, we have to consider it proper not to make any further reference to this part of the controversy. 9. After giving the facts, it was Mr. Gadgil's contention that to understand the relationship of the five signatories to the partnership deed dated 1-4-1971 and the rights of one against each of the other four, primarily one has to read the deed as a whole. Proceeding on that basis and the facts as discussed by the order of the Assistant Controller to which our attention was drawn both by Mr. Trimal and Mr. Gadgil himself, it was Mr. Gadgil's submission that the Assistant Controller had not proceeded properly to evaluate the deceased's share in the totality of the net property and assets of the firm, but that the Assistant Controller had merely picked out one property of the firm that was not recorded and validly recorded in the books of the firm and included the deceased's share in such property namely, Rs. 52,500 in the principal value of the estate passing on death. According to Mr. Gadgil, the decision of the Appellate Controller was wholly correct if one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat Mr. Trimal had rightly read para 5, but up to a stage only. Mr. Gadgil brought to our notice the subsequent observations in the said para thus : "...A partner does not have a defined share in the goodwill of the firm and the estate duty authorities cannot regard it as a separate property by itself apart from the other assets and liabilities of the firm and include its value in the estate of a deceased partner under section 5 of the Act. Mr. Mehta, relying upon this decision, contended before us that the addition of Rs. 10,000 on account of the value of the share of the said deceased in the goodwill of the said firm was erroneous as it was on the footing that the goodwill of the said firm constituted a separate property by itself apart from other assets and liabilities and that it was not open to the estate duty authorities to value the share of the said deceased in a particular asset of the firm as such. In our view, this submission cannot be sustained. A perusal of the order of the Assistant Controller clearly shows that he has not attempted to pick out separately any of the assets of the firm and to tax the share of the said deceased in that asset...." Mr. Gadgil submits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al by the taxpayer to the Supreme Court, the Supreme Court observed as would be seen from the headnote : ". . . When the Tribunal holds that such an assessment is liable to be set aside, the duty of the Tribunal does not end with making a declaration that the assessment is illegal. The proper order to be passed in such a case would be to set aside the assessment and to direct the ITO to make a fresh assessment in accordance with the procedure prescribed by law. It would not be correct merely to uphold the assessment and direct the ITO to make appropriate modifications. It is well known that an appellate authority has the jurisdiction as well as the duty to correct all errors in the proceedings under appeal and to issue, if necessary, appropriate directions to the authority against whose decision the appeal is preferred to dispose of the whole or any part of the matter afresh, unless forbidden from doing so by statute." The attention of Mr. Gadgil was further invited by us to the decision of the Madras High Court in CIT v. Indian Express (Madurai) (P.) Ltd. [1983] 140 ITR 705. After considering the principles laid down by them in CIT v. Mahalakshmi Textile Mills Ltd. [1967] 66 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the deceased's right, title and interest in the property of the firm as evidenced by the partnership books of accounts and the transactions in the light of the terms of the partnership deed dated 1-4-1971. Mr. Gadgil fairly pointed out that if patently or otherwise the decision of the Assistant Controller in the manner in which he has proceeded to make the assessment is wrong, considering the law handed down by the Supreme Court and as brought to his notice, viz., Kapurchand Shrimal's case and Indian Express's case. It was a decision which primarily we had to take and that he fairly speaking could not raise prime facie a valid objection against such direction. Mr. Gadgil, however, submitted that in such a direction to be given to the Assistant Controller it should be made abundantly clear that the Assistant Controller will have to value the deceased's right, title and interest in the property of the firm as evidenced by all the transactions of the firm up to the date of the death and in the light of the partnership deed dated 1-4-1971 taking into consideration the principles enunciated by the Bombay High Court and more particularly in the two decisions, namely, Fakirchand's case a ..... 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