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TMI Blog1999 (4) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... there was a clause in the partnership deed of the firm, Hiralal Bhikhabhai and Co., stating that partners would not be having any share in the goodwill of the firm, on the death of the deceased the goodwill was not liable to be included in the principal value of the estate ? 2. Whether, on the facts and in the circumstances of the case, and in law the Tribunal was right in holding that since the deceased had retired from the firm (though within two years) the goodwill would not be chargeable under section 9 of the Estate Duty Act, 1953 ?" The deceased was a partner in the firm of Hiralal Bhikhabhai and Co. Under clause 16 of the deed of partnership dated September 18, 1976, the goodwill of the business was to belong to the partnership f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ila v. CED [1980] 122 ITR 958, held that inclusion of goodwill as made by the Assistant Controller was not justified. The Tribunal on appeal by the Revenue upheld the order of the Controller of Estate Duty. At the outset we may notice that the decision in Smt. Mrudula Nareshchandra's case [1975] 100 ITR 297, was concerned with passing of the interest of the deceased in the assets of the firm of which she was a partner at the time of her death in the light of the similar clause as in the present case in the partnership deed. It was not a case where the deceased had ceased to be a partner in the firm much before the date of death, and she had as such no interest in the firm at the time of her death which will pass to the heirs. Obviously, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , there was a cesser of interest of the deceased partner in the goodwill of the firm simultaneously with his death and no interest passes therein to anyone, has since been reversed by the Supreme Court in CED v. Mrudula Nareshchandra [1986] 160 ITR 342. The principle enunciated by the Supreme Court is that where there exists a property, interest in which could pass on to the successors on the death of the present holder it does not cease to be disposable interest merely because under the agreement it does not pass on to the legal heirs but continues to vest in the remaining partners. In that event the interest of the deceased passes on to the remaining partners to the extent of the increase in their share. We therefore answer question No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sand in value." A perusal of the aforesaid section goes to show that merely because a disposition has been made within two years of the date of death by the deceased by way of another transfer it does not become liable to be included in the net value of the estate passing on the death of the deceased, unless the gift which was made within two years of the death of proposition can be held to be not bona fide. We find that the assessing authority has included the amount of the value of goodwill purported to have been passed to the remaining partners of the firm by way of gift by the deceased by not claiming a share in the goodwill of the firm at the time of retirement has not at all examined the question whether there was at all a gift, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partners. There is no dispute also that non-charging of share in the goodwill is solely due to the term in the deed of partnership. Finding has been recorded by the Controller of Estate Duty in his appellate order that retirement was necessitated due to the sickness and physical disability of the retired partner. Thus even without deciding but assuming that there was a gift in favour of the remaining partners by the retiring partner on the date of her retirement, it being in accordance with the already stipulated term of the partnership deed, and that retirement being necessitated due to physical disability, it was not lacking in bona fides so as to fall within the purview of section 9. We therefore answer question No. 2, in the affirmat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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