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TMI Blog1982 (4) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... her share of goodwill amounting to Rs. 2,15,000 ?" The reference relates to the assessment of estate duty on the estate passing on the death of Smt. Rajrani Bahu who died on 27th November, 1968. The deceased was a partner in the firm, M/s. Bhagwandas Shobhalal Jain. The deceased had 1/8th share in that firm. The deceased retired from the firm nearly a month before her death on 21st October, 1968. At the time of retirement the deceased was not paid any amount on account of her interest in the goodwill of the firm. The Asst. Controller held that the value of her share in the goodwill which he estimated at Rs. 2,25,000 ought to be included in the estate passing on her death. The Appellate Controller deleted this addition. In further appeal, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e before the death of the deceased shall be deemed to pass on the death. Section 27 provides that any disposition made by the deceased in favour of a relative of his shall be treated for the, purposes of this Act as I a gift unless the disposition was made on the part of the deceased for full consideration of money or money's worth paid to him for his own use or benefit. The question to be answered in this reference requires a consideration of the following three points : (1) whether goodwill is property in which a retiring partner is entitled to a share, (2) whether relinquishment of this right by a retiring partner amounts to disposition, and (3) whether this disposition was a gift falling under s. 9. As regards the first point whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the value of the retiring partner's share at the date of retirement : (see Lindley on Partnership, 14th Edn., p. 227). The next point to be considered is whether when the deceased did not receive her share in the goodwill at the time of retirement, did this result in a disposition in favour of the other partners ? We have already referred to the second Explanation to s. 2(15) which uses the word disposition " in a wide sense. The meaning of the word " disposition" was considered by the Supreme Court in CED v. Kantilal Trikamlal [1976] 105 ITR 92. In that case it was held that if the deceased took a lesser share than his entitlement in a partition, there was a disposition in favour of relatives to the extent of the difference between th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passing on the death of the deceased. The learned counsel for the assessee referred us to the case of CED v. S. Kuppuswami [1981] 131 ITR 709 (Mad). The facts in this case were that the deceased was a partner in a firm having 22% share. He retired from that firm. From the next day the firm was reconstituted by taking his two sons as partners and admitting a minor son to the benefits of the partnership. The share of the deceased in the firm was equally divided amongst his three sons. On these facts it was held that there was no disposition by the deceased in favour of the sons. The facts in this case are different. It was found that the retirement of the deceased from the firm and the subsequent admission of his sons to the firm were inde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in CED v. Smt. Laxmi Bai [1980] 126 ITR 73, and by the Gauhati High Court in CED v. Kanta Devi Taneja [1981] 132 ITR 437 (Gauhati). These cases have our respectful concurrence. The learned counsel for the assessee also brought to our notice a decision of the Gujarat High Court in Smt. Mrudula Nareshchandra v. CED [1975] 100 ITR 297. This case is distinguishable because there was a clear provision in the partnership agreement that the heirs of the deceased partner will have no right in the goodwill. For the reasons given above, our answer to the question referred is as follows : " The value of the deceased's share in the goodwill of the firm was property passing on her death liable to estate duty. " There will be no order a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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