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TMI Blog1975 (1) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... ter the 31st day of December in every year during the continuance of the partnership a general account shall be made up to such date of the credits, property, effects, debts and liabilities of the partnership and of all transactions matters and things usually comprehended in a general account of the like nature. Every such account shall be balanced agreed to and signed by all the partners and when so signed shall be binding on all the partners except that if any manifest error therein be detected and pointed out by any partner to the others and other of them within six months after such signature thereof such error shall be forthwith rectified. Immediately after the signing and settling of every such annual general account each partner shall be entitled to draw out and receive his share of the net profits of the business for the past year on bringing into account all monthly sums previously drawn out by him under the provisions in that behalf herein before contained. 18. If any partner shall die during the continuance of the partnership the surviving partner or partners shall as from the date of such death and if more than one in the proportions in which they were at such date ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not be less than Rs. 2,50,000. So the valuation of Rs. 5,00,000 as made by the Assistant Commissioner (Controller) is actually something less than two years' profits Thereafter, the accountable persons preferred a second appeal before the Appellate Tribunal and the very same contentions were urged before it. Reliance was also placed on a decision of Bench 'B' of the Tribunal in E.D.A. No. 3(Cal) of 1968-69 (Assistant Controller of Estate Duty, B-Ward, Calcutta v. Sri Purushottamdas Bangur, Calcutta) as also on a decision of the High Court of Australia in the case of Perpetual Executors and Trustees Association of Australia Ltd. v. Federal Commissioner of Taxation (94 CLR 1). The Tribunal held that s. 5 of the E.D. Act, 1953, applied and the valuation would have to be in accordance with the provisions of the partnership deed. Following the said decision the Tribunal further held that the value of the share of the deceased in the firm of Talbot & Co. including its goodwill should be determined in accordance with the terms of the partnership deed. In other words,the value of the goodwill would be taken at Rs. 1,00,000 for the purpose of estate duty proceedings and it would not be c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct this value of the deceased's share in the partnership should be determined in the manner as provided in the deed and, therefore, in that view of the matter, the value of the goodwill should be taken at Rs. 1,00,000. Therefore, according to the learned counsel, for the purpose of valuation of the property which passed to the legal representative of the deceased, the value of the goodwill should be taken at Rs. 1,00,000 as fixed by the said deed . But the learned counsel has further submitted that there is another aspect of the matter which needs consideration in the instant case. It is his submission that, in the instant case, upon the death of the deceased partner, benefit also accrued to the surviving partners due to the cesser of interest of the deceased in the partnership under s. 7 of the E.D. Act, 1953. Elaborating his argument, learned counsel submitted that in the instant case we have to consider the two situations, i.e., one before the death of the deceased and the other after his death. According to the learned counsel, upon the death of the deceased, due to cesser of his interest in the partnership, the surviving partners were also benefited. For determing the value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of CIT v. Scindia Steam Navigation Co. Ltd. [1961] 42 ITR 589 (SC). Learned counsel for the accountable persons submitted that in the instant case the property in question, namely, the deceased's share in the partnership, passed on his death under s. 5 of the E.D. Act. He further submitted that in the instant case we are not concerned with the value of the deceased's share in a partnership which included the goodwill and the same should be valued in the manner as provided in the partnership deed. Counsel relied on the decision of the High Court of Australia in the case of Perpetual Executors and Trustees Association of Australia v. Federal Commissioner of Taxation (94 CLR 1). Learned counsel further contended that as the instant case the question of applicability of s. 7 of the E.D. Act was not mooted before the revenue authorities, including the Tribunal, and also does not come within the purview of the question referred, it is not open to the revenue to argue this point. In the Australian case (94 CLR 1) cited by the counsel for the accountable persons the facts were that one " T " at the date of his death was engaged in business in partnership with other persons pursua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contained in the deed as stated earlier. But so far as the other surviving partners are concerned, in our view, due to cesser of interest of the deceased in the partnership upon his death, corresponding benefit also accrued to them and for determining the value of such benefit for the purpose of estate duty, market value of the goodwill and not the value as stated in the partnership deed should be taken into account but it should be borne in mind that as the surviving partners are required to pay to the personal representative of the deceased the amount mentioned in the deed in respect of the goodwill, the said amount should be deducted from the market value. In our view, so far as the goodwill is concerned, the benefit to the surviving partners is to the extent of its market value less the sum of Rs. 1,00,000 being the amount which they are liable to pay. to the personal representatives in terms of the partnership deed. In this connection reference may be made to the following observation in Dymond's Death Duties, 14th edn., at page 81, where it is observed : " Where on the death the deceased's share accrues to the surviving partners without payment, it passes direct to them und ..... X X X X Extracts X X X X X X X X Extracts X X X X
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