(1.) THIS is a reference under Section 64(1) of the E.D. Act, 1953. The question of law referred by the Tribunal is as follows :
(2.) THE reference relates to the assessment of estate duty on the estate passing on the death of Smt. Rajrani Bahu who died on 27th November, 1968. THE deceased was a partner in the firm, M/s, Bhagwandas Shobhalal Jain. THE deceased had 1/8th share in that firm. THE deceased retired from the firm nearly a month before her death on 21st October, 1968. At the time of retirement the deceased was not paid any amount on account of her interest in the goodwill of the firm. THE Asst. Controller held that the value of her share in the goodwill which he estimated at Rs, 2,25,000 ought to be included in the estate passing on her death. THE Appellate Controller deleted this addition. In further appeal, the Tribunal came to the conclusion that the goodwill of a firm is an asset which can be gifted and, therefore, it should be held that the deceased gifted her share of goodwill to the firm. On this reasoning the Tribunal restored the order of the Asst. Controller.
(3.) AS regards the first point whether goodwill is property, the answer must be in the affirmative in view of the ruling of the Supreme Court in K.K. Shah v. Mrs. Khorshed Banu, AIR 1970 SC 1147. It was held in this case that goodwill of a firm is an asset and that on the death of a partner the interest of the partner in this asset or property passes to his legal representatives and not to the surviving partner. It was further held that this proposition holds good even though under the terms of the partnership the firm is not dissolved on the death of a partner, unless there is a specific term in the deed of partnership that the death of a partner will operate to extinguish his proprietary right in the assets of the firm.