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TMI Blog1981 (3) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... the deceased in the goodwill of the firm, was justified ? " One S. Hansaji Ostwal was a partner of the firm, M/s. Shah Shivalal Hansaji Ostwal. It was doing business in commission agency and trading in cotton seeds at Kundgol in the district of Dharwad. Hansaji Ostwal died on September 12, 1971. He had 17% share in the firm. Bhaktavarmal Shivalal Ostwal, son of the deceased partner, became an accountable person for the purpose of levy of estate duty under the provisions of the E.D. Act, 1953. The Assistant Controller of Estate Duty, Hubli, while computing the estate duty on the assets which passed on to the accountable person on the death of his father by virtue of s. 7 of the Act, computed the share of the deceased in the goodwill. Taki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the value of the goodwill passing on to the accountable person on the death of the partner. In support of this submission, he relied on the judgment of the Gujarat High Court in Smt. Mrudula Nareshchandra v. CED [1975] 100 ITR 297. Before the Tribunal also reliance was placed on the said decision. The Tribunal, however, preferred to follow the decision of the Madras High Court in CED v. Ibrahim Gulam Hussain Currimbhoy [1975] 100 ITR 320, in which the said High Court had taken a view contrary to the view taken by the Gujarat High Court. The learned counsel submitted that the view taken by the Gujarat High Court is correct and the same should be accepted in preference to the view taken by the Madras High Court. In our view, the facts of t ..... X 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 to the effect that the outgoing partner (either by death or by retirement), or his legal heirs, as the case may be, would not be entitled to any share in the goodwill. (ii) The proceedings in this case for the levy of estate duty, unlike in those cases, are not against the surviving partner who are not legal heirs of a deceased partner but against the son of the deceased partner who is his legal heir. Therefore, the question which arises for consideration in this case is Whether the accountable person, who is the legal representative of the deceased partner was or was not entitled to receive a share of the deceased partner in the goodwill of the firm even though the firm was continued in vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, and, consequently, the goodwill did not pass to the accountable person as there was a clause in the partnership deed to the effect that on the death of a partner the firm shall not stand dissolved and shall be continued and was accordingly continued. It is this submission that has given rise to the question set out in the preceding paragraph. A similar question was considered by the Supreme Court in Khushal Khemgar Shah v. Mrs . Khorshed Banu Dadiba Boatwalla, AIR 1970 SC 1147. Interpreting s. 55 of the Partnership Act, the Supreme Court observed (p. 1148): ".. ...... it is not enacted thereby that goodwill may be taken into account only when there is a general dissolution of the firm, and not when the representatives of a partner cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpressly 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 the present case, as stated earlier, there was no clause in the partnership deed to the effect that on the death of a partner his legal representative would not be entitled to any share in the goodwill and that the goodwill shall enure to the benefit of the surviving partners who would continue as the partners of the firm. In the absence of such clause, the accountable person being the legal representative of the deceased partner was entitled to the assets of the deceased partner in the firm which includes his share in the goodwill. Therefore, we see ..... X X X X Extracts X X X X X X X X Extracts X X X X
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