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TMI Blog1985 (9) TMI 114X X X X Extracts X X X X X X X X Extracts X X X X ..... he deceased Shri Cawas M. Mody. In clause 3(c) of the partnership deed it was mentioned that the goodwill of partnership business should be valued at 18 months' purchase of the average annual profits of the last completed four years or shorter period as the case might be and should not in any event for the purpose of accounting between partners either upon dissolution or upon death of the said deceased Shri Cawas M. Mody be valued at more than Rs. 50,000. The contention of the accountable person before the Assistant Controller was that the value of goodwill to be included in the principal value of the property passing on death could not exceed Rs. 50,000 in view of clause 3(c) of the partnership deed. The Assistant Controller rejected the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 297. The second decision is CED v. Babubhai Harjivandas [1981] 129 ITR 276. The learned departmental representative has relied on the reasons given in the orders of the lower authorities. 3. We have considered the rival submissions. The leading case on this subject is the decision of the Privy Council in Perpetual Executors Trustees Association of Australia Ltd.'s case. In that case the deceased was a partner in a firm and the partnership deed provided that the firm would not be dissolved by the death of the partner and further that on the death of a partner, the surviving partners would have an option to purchase the deceased's share in the partnership, the purchased price being determined as mentioned in the deed of partnership. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, in the present case, the market value of the goodwill at the time of the date of death of the deceased would be included in the principal value of the property passing on death in spite of the fact that the partnership itself provides that the value of goodwill while taking accounts on the date of death of the deceased would not exceed Rs. 50,000. The only effect of this restriction would be that the legal heir would not be entitled to receive more than Rs. 50,000 on account of goodwill when accounts are taken. However, the goodwill to the extent of remaining value would pass on to the surviving partners. Consequently, it is the market value of the goodwill on the date of death of the deceased, which would be includible and not merely ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Full Bench of the Punjab and Haryana High Court in State v. Prem Nath [1977] 106 ITR 446 where it was observed that the view of the Gujarat High Court was opposed to the view of the Privy Council in the case of Perpetual Executors Trustees Association of Australia Ltd. We may also mention that in an earlier decision of the Gujarat High Court in Sakarlal Chunilal v. CED [1975] 98 ITR 610, a view contrary to the view taken in the subsequent two decisions had been taken. 6. The learned counsel for the accountable person argued that in this case the deceased ceased to have interest in goodwill in his lifetime. We are unable to agree with this contention. No clause in the partnership deed could be pointed out in support of this content ..... X X X X Extracts X X X X X X X X Extracts X X X X
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