1984 (7) TMI 92

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..... firm for the last three years. From this he deducted interest on capital at the rate of 12 per cent and also remuneration of partners at the rate of Rs. 500 per month. The net resultant profit worked out to Rs. 67,721. By taking the multiplier of 3, the value of the goodwill was determined at Rs. 2,03,163. The deceased's share being 25 per cent was determined at Rs. 50,791 and was included in the assessment. 2. The accountable person appealed to the Controller. It was submitted before him that the estimate of the value of the goodwill was excessive among others, on the ground that the multiplying factor taken at 3 times of the average profit was high, that the remuneration of the partners at the rate of Rs. 500 per month allowed was low .....

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..... counsel for the accountable person. In the case of Smt. Vindoor Bai, the Court considered the nature of the goodwill. We quote below from the headnote of the case, which, in our opinion, is sufficient for the purpose : " Goodwill of a business is an intangible asset. It is the whole advantage of the reputation and connection formed with the customer together with circumstances making the connection durable. It is that component of the total value of the undertaking which is attributable to the ability of the concern to earn profits over a course of years or in excess of normal amounts because of its reputation, location and other features. It is the value of the attraction to customers arising from the name and reputation for skill, int .....

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..... ly 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 section 40. Therefore, such benefit is not liable to estate duty under section 7. " The present is not a case, where it is specifically stipulated between the partners of the 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 cla .....

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