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TMI Blog1972 (8) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... as. The Deputy Controller determined the principal value of the estate at Rs. 19,34,884 which included, inter alia, (1) Rs. 1,20,826 representing the deceased's 1/6th share of the goodwill ill the managing agency firm of Messrs. Rangaswami Naidu and Sons, and (2) Rs. 57,168 representing the deceased's 1/12th share of goodwill in the managing agency firm of Messrs. R. Bheema Naidu and Company. This was objected to by the accountable persons and they preferred an appeal to the Central Board of Direct Taxes under section 63 of the Act. It was contended before the Board that the Deputy Controller erred in attributing any goodwill to the managing agency firms of Messrs. Rangaswami Naidu and Sons and Messrs. Bheema Naidu and Company in which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld terminate by 15th April, 1960, valued the goodwill at the present value of the future maintainable profits per annum, for seven years and taking the future maintainable profits at the average net profit of the three years immediately before the death of the deceased and determining the present value by adopting the multiple factor from the interest tables. Before the Board, it was pointed out by the accountable person that the goodwill determined by the Controller worked out nearly to 89 per cent. of the actual profits earned by the managing agency firms of Messrs. Rangaswami Naidu and Sons and 74% of the actual profits earned for the seven years by the managing agency firm of Messrs. Bheema Naidu and Co. and that, therefore, the valuat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be transferred without the approval of the mills in general meeting and that any change in the constitution of the firms should also have the approval of the Central Government. It was also contended that the managing agency firms have no goodwill at all, that even if they have any goodwill, it cannot be taken as " property " passing on death and that it has no saleable value which could property be evaluated. We are not inclined to accept the above contentions put forward by the accountable persons. The question whether the managing agency could be regarded as business was considered by their Lordships of the Supreme Court in Lakshminarayan Ram Gopal & Son Ltd. v. Government of Hyderabad where the question arose with reference to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive the share of income from the managing agency business and that is clearly property. It has been clearly held in M. E. Moolla Sons Ltd. v. Official Assignee, Rangoon, that a right to receive income from property is itself property. Therefore, the contention of the accountable persons that the managing agency agreements are only contracts of personal service and, therefore, they had no goodwill cannot be accepted. As a matter of fact the Supreme Court while dealing with a similar contention held in J. K. Trust, Bombay v. Commissioner of Income-tax, that : " ..... even an office of trusteeship was held to be property especially when emoluments were attached to it, and that must a fortiori be the position in the case of office of managing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , holding that an office of trusteeship when emoluments were attached to it was property. In Narayanan Namboodiripad v. State of Madras, this Court had observed : " We are accordingly of opinion that hereditary trusteeship is within the protection afforded by article 19(1)(f) even though there was no emoluments attached to the office. " A somewhat similar observation was made by the Supreme Court in Sambudamurthi Mudaliar v. State of Madras, that the office of a hereditary trustee is in the nature of " property " and this is so whether the trustee has beneficial interest of some sort or not. The above observations were considered to be obiter in Kakinada Annadana Samajam's case and the correct position of law was held to be that heredita ..... X X X X Extracts X X X X X X X X Extracts X X X X
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