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TMI Blog1979 (4) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... in holding that the 'goodwill' of the firm has to be valued only with reference to trading profits and not with reference to both the manufacturing and trading profits as adopted by the Assistant Controller of Estate Duty ? 2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in law in fixing the trading profits at 1/3rd of the total profits and the value of 'goodwill' at one year's purchase of average profits as against three years adopted by the Assistant Controller of Estate Duty? " The facts giving rise to the above reference as set out in the statement of case drawn up by the Appellate Tribunal may be briefly stated. The deceased was a partner of a firm called M/s. Krishna Mining Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd estimated the goodwill at one and a half years' purchase. The Appellate Controller, accordingly, fixed the value of the goodwill at Rs. 1,00,000 as against Rs. 5,74,000 determined by the Asst. Controller . The Appellate Controller held that the liability of Rs. 8,00,000 in favour of G. Mohan Rao had to be added since a disclosure was made by the firm in May, 1965, and the profits made by the firm up to March 31, 1961, were covered by the disclosure of Rs. 8,00,000. He, however, held that a separate addition of Rs. 4,00,000 again as undisclosed wealth was not called for since the profits made in the years 1958-59 to 1960-61 were also included in the disclosure. He, accordingly, deleted the addition of Rs. 4,00,000. Both the accountable pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the reasons assigned by the Tribunal and hold that the goodwill of the firm could be valued only with reference to the trading profits of the firm and not with reference to both the manufacturing and trading profits as adopted by the Appellate Controller. Question No. 1 is, therefore, answered in the affirmative and in favour of the accountable person. It may be recalled that the Appellate Tribunal fixed the trading profits at one-third of the total profits and determined the value of the goodwill at one year's purchase of average profits. In K. A. Subramaniam v. CED [1962] 46 ITR (ED) 1, a Division Bench of the High Court of Madras held : " A rough and ready method of valuing the goodwill of a business is to take it as being wor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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