9911796707
TMI Blog1993 (4) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... rmal Daga expired on October 15, 1974. He was a partner in the firm, Messrs. Sagarmal Daga and Company. In the course of the assessment proceedings of the accountable persons, it was pointed out that the deceased had retired from the firm on October 9, 1974, i.e., a few days prior to his death, and on this ground it was submitted that no share in the goodwill of the said firm can be added as he was no longer a partner therein. The Assistant Controller of Estate Duty held that in accordance with the provisions of section 9 of the Estate Duty Act, the deceased person should be treated as having made a disposition of his share in the goodwill of the firm. Since the disposition was within a period of two years of death, the value of the goodwill was includible under section 9 of the Estate Duty Act. The value of the goodwill was accordingly determined on the basis of the income of the firm for the last five years. It was also observed that the provisions of section 2(15) of the Estate Duty Act, 1953, defines "property", according to which "property" includes any interest in property, movable or immovable, the proceeds of sale thereof and any money or investment for the time being repre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ves, on his death, upon his legal representatives notwithstanding any clause in the deed of partnership to the effect that the surviving partners are entitled to carry on the business on the death of the partner. A term extinguishing the right of a deceased partner to a share in the assets is not to be implied merely because the deed provides for continuance of business by the surviving partners. Reliance was also placed on the decision of the Madras High Court in CED v. Ibrahim Gulab Hussain Currimbhoy [1975] 100 ITR 320, where in accordance with a clause in the partnership deed, the retiring partner or legal representatives of the deceased partner were not entitled to any goodwill. It was held that the goodwill being assets of the firm belonged to the firm, that means, to all the partners, and the death of the deceased did not extinguish his share in the goodwill but resulted in augmenting the interest of the surviving partners in the goodwill in view of clause 14 of the partnership deed and hence there is a passing of the deceased's share in the goodwill even if there is no devolution of the deceased's interest in the goodwill on the legal representatives. The decision of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id firm on his death. This was a matter in respect of two firms, namely, Kantilal Manilal and Company and Pannalal Bros. In the case of the former firm, clause 2 of the deed of retirement provides that all the assets of the said firm including the goodwill, rights and privileges and outstandings together with all its liabilities will be taken over by the continuing partners. Clause 4 provided that the continuing partners shall pay and discharge all the debts, liabilities and obligations of the partnership and shall indemnify or keep indemnified the retiring partner against all costs, claims and demands in respect thereof. In respect of retirement of Pannalal Bros., the provisions were more or less identical. It was submitted that if a benefit had been secured by the provision to the continuing partners, viz., the obtaining of the share of the retiring partners in the assets including the goodwill this was accompanied by taking over of an obligation, viz., the entire liabilities of the firm and the further obligation to indemnify or keep indemnified the retiring partners against the claims made in respect of such liabilities. In these circumstances, it was held by the court that it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the court will insist upon some indication that the right to a share in the assets is, by virtue of the agreement, that the surviving partners are entitled to carry on the business on the death of the partner, to be extinguished. In the absence of a provision expressly made or clearly implied, the normal rule that the share of a partner in the assets devolves upon his legal representatives will apply to the goodwill as well as to other assets.' In CGT v. Chhotalal Mohanlal [1987] 166 ITR 124, their Lordships of the Supreme Court have held that reconstitution of a partnership firm by reducing the share of the partner and admitting his two minor sons to the benefit of the firm in respect of the remaining share, amounts to gift. Following the principle laid down by the apex court, the retirement of the deceased has to be considered as a gift as the shares of the other partners have increased thereby and, therefore, it is a gift." The Supreme Court in CED v. Mrudula Nareshchandra [1986] 160 ITR 342 has held that a partner has a marketable interest in all assets of the firm including the goodwill and the said interest is property within the meaning of section 2(15) of the Estate Dut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax Appellate Tribunal shall now consider this point and shall give its finding after hearing the parties. In respect of the second point, the facts are that the accountable person has claimed deduction of Rs. 50,000 being provision for the marriage of daughters of the deceased, in the smaller Hindu undivided family. No documentary evidence in support thereof was filed to justify the claim and it was only in the will of the deceased that such provision was provided, but the Assistant Controller of Estate Duty came to the conclusion that the "will" will be operative only after the death and, therefore, it cannot be said that the deceased had made a settlement for the purpose before death and the claim was rejected. In the appeal before the Appellate Controller of Estate Duty, the claim was held not allowable and it was held by the Appellate Controller that after the coming into force of the Hindu Succession Act every female heir is entitled to a share in the deceased's interest in the Hindu undi vided family property and, therefore, the question of allowability with regard to the marriage expenses of the family after the death of the deceased does not arise. It was further obse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Deshpande v. Kusum Dattatraya Kulkarni, AIR 1978 SC 1791, was also relied upon wherein it was observed that where a father was the karta of a joint Hindu family and the debts were contracted by the father in his capacity as manager and head of the family for family purposes, the sons as members of the joint family were bound to pay the debts to the extent of their interest in the coparcenary property. It was further observed that as the loan was borrowed for the purpose improving joint family lands, the loan would ipso facto be for legal necessity. Reliance was also placed on the decision of the Madras High Court in CGT v. M. Radhakrishna Gade Rao [1983] 143 ITR 260, wherein it was held that it is a legal obligation which has to be discharged by it for the marriage of the daughter and if a settlement has been effected for making appropriate provision for the marriage of the daughter in accordance with the custom and usage prevalent in the family, the settlement cannot be considered to be a gift. Another decision of the Andhra Pradesh High Court in CGT v. Bandi Subba Rao [1987] 167 ITR 66 was also relied upon, in which the provisions of the Hindu Adoptions and Maintenance Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mily, according to the rule laid down in the next following section." The matter with regard to the deduction for provision for the marriage expenses of an unmarried daughter of the deceased has to be considered in the light of the provisions of section 44 of the Act. Section 44 refers to the deduction in respect of debt or encumbrance and it has to be examined as to whether the provision for the marriage of an unmarried daughter of a Hindu is an encumbrance on the property of the family which is enforceable. The position under the Hindu law is settled and has been enumerated by Mulla in his book mentioned above as well. An unmarried daughter who is born in a family is entitled to reasonable expenses for her marriage out of family property. The matter was also examined by the Full Bench of the Madras High Court in Subbayya v. Ananda Ramayya, AIR 1929 Mad 586. The provisions of section 6 of the Hindu Succession Act also contemplate devolution of the property. In accordance with the provisions of the Hindu Adoptions and Maintenance Act, 1956, it is the obligation of the father to spend money for the marriage of his unmarried daughter during his lifetime and according to the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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