9911796707
TMI Blog1979 (3) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... ue of the deceased's share in the said firm by taking into account, separately, the balances credited to the deceased in the capital account and in the current account, 20% share in the provisions for liquidated damages and development reserve and, lastly, the deceased's share in the goodwill of the business. The goodwill of the firm was valued at Rs. 6 lakhs and that of the share of the deceased there in was calculated at 20% to be Rs. 1,20,000. The value of the deceased's share in the said firm calculated as aforesaid was included in his estate for purposes of estate duty. Being aggrieved, the accountable persons preferred an appeal to the Appellate CED and contended, firstly, that the business did not have any goodwill, and further that the value of the goodwill, if any, was wrongly computed ignoring the figures of the total income as finally determined and taking into account interest only on the fixed capital at a low rate of 6% . The Appellate Controller held, that the business of the firm was of long standing and had a goodwill. He, however, determined the average annual income of the firm at Rs. 1,94,540, allowed interest at the rate of 9% per aunum on the entire capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its valuation could not be included in the estate of the deceased for the purpose of estate duty ? " At the hearing, Mr. Suhas Sen, learned counsel for the revenue, contended, inter alia, that though under cl. 17 of the deed, death of a partner would not result in the dissolution of the partnership, yet for Valuation of the share of the deceased in the firm for estate duty the share of the deceased in the goodwill had to be included as the same would pass either to the legal representative of the deceased or to the surviving partners. Mr. Sen submitted that the decision in CED v. Shri Ved Prakash Jain [1974] 96 ITR 303 (Punj), relied on by the Tribunal, was no longer good law inasmuch as the same had been specifically overruled in a subsequent Full Bench decision of the same High Court in the case of State v. Prem Nath [1977] 106 ITR 446 (Punj) [FB], where it was held that the goodwill was an asset of the firm and the share of a deceased partner in the same along with his share in the other assets devolved on death for the purpose of estate duty notwithstanding any clause in the deed of partnership providing that the death of a partner would not dissolve the firm and that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mplied, 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 the assets". (c) S. Devaraj v. CWT [1973] 90 ITR 400 (Mad). The facts in this case were that the deceased at his death was a partner in a managing agency firm. At the assessment to estate duty, the accountable persons contended that the managing agency firm had no goodwill and, in any event, they not having realized any amount on account of the deceased's share in the goodwill, nothing should be included in the estate on that account. On a reference, the Madras High Court held that the interest of the deceased in the goodwill of the firm in law and under the deed vested in the accountable persons and was as such includible in the estate. The factum of non-receipt of the deceased's share was immaterial. (d) CED v. Ibrahim Ghulam Hussain Currimbhoy [1975] 100 ITR 320 (Mad). In this case, the deed provided that the retiring partner or the legal representatives of a deceased partner would not be entitled to the goodwill of the business and that only the surviving or continuing partners would be entitled to the same and to continue to car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were, inter alia, that in respect of the principal asset of a testator, viz., his interest in a partnership, the deed conferred options on the surviving partners to purchase his share in the capital on his death and further provided that in computing the amount payable on the exercise of such option no sum would be added or taken into account in respect of goodwill. It was held that under s. 8(4)(e) of the Estate Duty Assessment Act of Australia, and the terms of the deed, the beneficial interest of the testator in the goodwill passed or accrued or devolved on his death and was, therefore, deemed to be a part of his estate. It was held further that the fact that the value of the goodwill was not to be taken into account in calculating the price receivable by the estate for such interest was irrelevant. Mr. Sen last cited an unreported decision of this court in Matter No. 66 of 1971 intituled CED v. John Gregory Apcar [1979] 119 ITR 192 (Cal). In this case, the partnership deed provided that for the purpose of ascertaining the amount payable to the representatives of a deceased partner for the latter's share in the firm the value of the goodwill of the business would be deemed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In that case, the deed provided that in case of death or retirement of any partner the partnership will not stand dissolved but the legal representatives of the deceased would be entitled to be paid his share of capital and interest in the firm after the same could be determined by mutual consent on the basis of the balance-sheet and profit and loss account of the firm as on the date of death. The estate duty authorities, in calculating the value of the share of the deceased partner in the firm, valued individual items of assets and included in the estate the prescribed share in the value of a particular jute press separately. It was held that the authorities were required to compute the value of the entire share of the deceased in the firm on the basis of what it would fetch in the open market and they were not entitled to value the share of the deceased in the firm first on estimate item-wise and thereafter to add thereto the enhanced value of any particular asset. It appears to us that the law on the question stands well-settled. What passes on the death of a partner is his share in the firm, that is, his interest in the entire unit of the firm. This has to include goodwill. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will being part of the entire assets of the firm, the entire share of the deceased therein has to be valued in accordance with law and this value has to be included in the estate for levy of estate duty. During the course of his argument Mr. Roy stated on instructions that a Miscellaneous Application in the appeal before the Tribunal from which the present reference has arisen was pending and had not been disposed of. At that stage, however, he could not furnish further particulars of the said application. While this judgment was being delivered Mr. Roy furnished a copy of the said miscellaneous application. It is stated in this application, inter alia, as follows : (a) The accountable persons had contended before the Appellate Controller of the Estate Duty that the business of the firm did not have any goodwill. (b) The Appellate Controller rejected such contention on the sole ground that the business was of long standing. (c) That the business did not have any goodwill at all was urged in appeal before the Tribunal and there was an alternative contention that the deceased's share in the goodwill, if any, did not pass on his death. (d) In its order the Tribunal by mistak ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
