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TMI Blog1976 (9) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... of the goodwill of the business of the firm was justified. 2. Whether there was material on record to justify the finding of the Tribunal that at the time of the death of the deceased the business of the firm of Indian Reinforcing Company had a goodwill and if so, whether the basis for valuation of the goodwill approved by the Tribunal is proper ? 3. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that in evaluating the share of the deceased in the firm of Indian Reinforcing Company an adjustment referable to the amount outstanding in the development rebate reserve account in the books of the firm was justified ? " The deceased, A.K.D. Venkata Raja, who passed away on October 31, 1964, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tnership is arrived at by deducting the total liabilities of the firm from the total assets and arriving at the surplus of the assets and determining the deceased partner's share in the said surplus. In this case, the development rebate reserve was created out of the accumulated profits and it cannot be said to be a liability of the firm. Therefore, it cannot be deducted from the total assets of the firm for the purpose of arriving at the surplus of the assets over the liabilities. This view of ours is supported by a decision of this court in G. Ramaswamy Naidu v. Commissioner of Income-tax [1972] 86 ITR 768 (Mad). There the questions arose with reference to the determination of the accumulated profits under section 2(22)(c) of the Income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) of this section says : " The deduction referred to in section 33 shall not be allowed unless an amount equal to seventy-five per cent. of the development rebate to be actually allowed is debited to the profit and loss account of the relevant previous year and credited to a reserve account to be utilised by the assessee during a period of eight years next following for the purposes of the business of the undertaking, other than-- (i) for distribution by way of dividends or profits ; or (ii) for remittance outside India as profits or for the creation of any asset outside India : " There are provisos, and it is not necessary to refer to those provisos. It is basing himself on this provision that Mr. Swaminathan contends that the develop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion is in the affirmative and against the accountable person. As far as the other two questions dealing with the goodwill are concerned, the first point to be considered is that posed by question No. 2, namely, whether the Tribunal had any material at all to hold that the business had a goodwill. The partnership deed, which was originally entered into between the partners, did not make any reference to the goodwill at all. The Tribunal itself found the existence of a goodwill only in paragraph 13 and there the Tribunal states : " The product manufactured by the firm and placed on the market is somewhat uncommon and it is difficult to say that customers would acquire it with facility from others. Further, from the extent of the profits a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, the only other reference the Tribunal has made is to "surrounding circumstances". But the order of the Tribunal itself does not show what these surrounding circumstances are. Under these circumstances, there is no difficulty in holding that the Tribunal had no material whatever for coming to the conclusion that the firm had a goodwill. Consequently, our answer to the second question is in the negative and in favour of the accountable person. Once we hold that the Tribunal had no material to come to the conclusion that the firm of Indian Reinforcing Company had a goodwill, the question of evaluating the deceased's share of the goodwill does not arise. Therefore, our answer to the first question is also in the negative and in favour of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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