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TMI Blog1980 (3) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... ad, and Rs. 10,918 with M/s. Laxman Dass Kashi Ram, Surat, in the name of his joint family. In regard to the deposit of Rs. 48,103, the Asst. Controller took the view that the deposit amounted to a gift under s. 10 of the Act and since the deceased had not entirely excluded himself from benefits arising as a result of that deposit, the entire amount was liable to be added in the estate of the deceased under that section. He was further of the opinion that the throwing of this entire amount of Rs. 82,703 into the common hotch-potch would amount to a disposition made without any consideration within the meaning of s. 27 of the Act and would be taken to pass on the death of the deceased. Thus, this entire amount was included by the Asst. Controller in the estate of the deceased. Another item with which we are concerned in this reference was the value of the goodwill of the firm. In the opinion of the Asst. Controller each business has a goodwill and the same is a property passing on the death. In so far as the determination of the value of the goodwill was concerned he took into consideration the capital and profits for five years preceding the death of the deceased, the average of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll passes when the firm continues as before and, secondly, whether the passing of the goodwill alone would be sufficient for the inclusion thereof in the estate of the deceased. So far as the first aspect is concerned, the matter stands squarely covered by a decision of the Supreme Court and another of this court. In Smt. Kamlawati Raizada v. CIT [1976] 105 ITR 703 (All), it has been held that goodwill is an advantage which trade or business develops by virtue of an action like the standing of the business, the personalities who are engaged in the business, its location and the like. These are qualities which a person who is carrying on the business develops by the method of doing business to attract customers. In Khushal Khemgar Shah v. Mst. Khorshed Banu, AIR 1970 SC 1147, the Supreme Court has held that unless it was established that the right, to share in the assets of a partnership firm, of a deceased partner has been extinguished on his death, the normal position is that the share of partner in the assets devolves on his legal representatives and that this principle will apply to the goodwill and other assets of the partnership. It is thus established that the share of a part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as invited by Sri R. K. Gulati, learned counsel for the respondent-accountable person to a decision of the Gujarat High Court in Smt. Mrudula Nareshchandra v. CED [1975] 100 ITR 297 in which it has been held that a partner in a firm has a marketable interest in all the capital assets of the firm including the goodwill even during the substance of the partnership. Interest in the goodwill is property within the meaning of s. 2(15) of the Act but the goodwill of the firm standing by itself cannot earn any income. In a case, where it is specifically stipulated between the partners of a firm that on the death of any of the partners, the partnership shall not stand dissolved and that the heirs of the deceased partner shall have no right whatsoever to claim any share in the goodwill of the firm, the benefit arising to the other partners on the cessor of interest in the goodwill, on the death of one of the partners, cannot be measured in terms of s. 40. Therefore, such benefit is not liable to estate duty under s. 7. Sri Gulati also relied upon a decision of the Calcutta High Court in CED v. Annaraj Metha and Deoraj Metha [1979] 119 ITR 544, where it has been held that the entirety of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... culated on established commercial principles will be included in the principal value of the estate of the deceased. So far as the determination of the value of the goodwill is concerned there is no dispute before us. Now, coming to question No. 1, the facts have already been set out above and two aspects fall for our consideration. Firstly, whether the throwing of this amount by the deceased into the common stock of the family would attract the application of s. 27 of the Act and, secondly, whether the deposit of Rs. 48,103 out of that amount in the account of the HUF of the deceased would be deemed to pass on the death of the deceased for the reason that the deceased had not excluded himself from the benefit of the gifted property. So far as the second aspect is concerned it may readily be disposed of since it is covered by a Full Bench decision of our own court rendered in CED v. Thanwar Dass [1974] 94 ITR 101 [FB]. What has been laid down in that case is that where a person makes a gift by adjustment entries in the books of account of a firm in which he is a partner and the money so gifted is not withdrawn by the donee but is allowed to remain with the firm, the donor must ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as an immediate gift inter vivos whether by way of transfer, delivery, declaration of trust, settlement upon persons in succession, or otherwise, which shall not have been bona fide, made two years or more before the death of the deceased shall be deemed to pass on the death. In the case of gifts made for public charitable purposes this period is six months. Further sub-s. (1) does not apply to gifts made in consideration of marriage subject to a maximum of Rs. 10,000 in value as also gifts which are proved to the satisfaction of the Controller to have been part of the normal expenditure of the deceased subject to a maximum of Rs. 10,000 in value. The expression inter vivos occurring in sub-s. (1) provides a key to its interpretation. In the Random House Dictionary of English Language (College Edn.) (Reprint 1976 at p. 6699) one of the senses in which this expression can be used is : " Inter vivos: (Especially of gift or trust) taking effect during the lifetime of the parties involved. [Literally among (the) living]. " According to this definition, therefore, the expression inter vivos refers to a transaction between two or more living persons, that is to say, bilateral or mul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idered in these decisions with particular reference to the definition of 'transfer of property' under that Act. We are of the view that the word 'disposition' in section 27(1) of the Estate Duty Act also refers to a bilateral or multilateral act. The section refers to a disposition by the deceased in favour of a relative and also speaks of partial failure of consideration. Section 9 also refers to property 'taken under a disposition'. Therefore, in our opinion, the word 'disposition' in section 27(1), however wide its ambit may be, would not include the unilateral act of a person by which he throws his self-acquired property into the common stock of the joint family." The Bombay and the Kerala High Courts as well have taken the view that s. 10 of the Act does not apply to blending (vide CIT v. M.M. Khanna [1963] 49 ITR 232 (Bom) and CED v. Arunachalam Chettiar [1968] 67 ITR 607 (Ker)). Section 2(xxiv) of the G.T. Act defines the expression "transfer of property " and uses the words disposition, conveyance, assignment, settlement, delivery and payment as some of the modes of transfer of property. In CED v. Kancharla Kesava Rao [1973] 89 ITR 261 (SC), the import of these words ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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