H. R. Khanna, J. - (1.) This appeal on certificate is by the Controller of Estate Duty against the judgement of the Kerala High Court whereby the High Court answered the following questions referred to it under Section 64 (1) of the Estate Duty Act (hereinafter referred to as the Act) in favour of the accountable persons and against the revenue:"Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the sum of Rs. 2,70,000 is not includible in the estate of the deceased under Section 10 of the Estate Duty Act -
(2.) The matter relates to the estate of R. V. Veeramani Iyer who died on November 18, 1960. The accountable persons are the six sons of the deceased. The deceased was the proprietor of two business concerns, one dealing in yarn and carrying on money-lending business under the name and style of P. R. N. Ramanathan Iyer and Co. and the other dealing in piece-goods under the name and style of R. V. Veeramani Iyer. With a view to convert the business of the aforesaid two concerns into partnership business with his four major sons, the deceased transferred a sum of Rupees 45,000 from his personal account to the credit of each of his four adult sons on September 12, 1955. On September 17,1955 a partnership deed was executed by the deceased and his four adult sons constituting a partnership firm under the name and style of P. R. N. Ramanatha Iyer and Co. The sums of Rs. 45,000 transferred by the deceased to each of his four sons were treated as their share capital in the partnership business. A day later on September 18, 1955 two minor sons of the deceased were also admitted to the benefit of the said partnership. Agreement dated September 18, 1955 was executed in this connection and in that agreement the deceased acted as guardian of his minor sons. The deceased also transferred on September 18, 1955 a sum of Rupees 45,000 from his personal account in the firm to each of his two minor sons who were admitted to the benefits of partnership. One of the minor sons attained majority on December 21, 1957 and he was taken as a regular partner by agreement dated March 29, 1958. The other son continued to be a minor till the date of the death of the deceased. The share of the deceased and each of his six sons, including the minor son was one-seventh in the profits of the partnership till the date of the death of the deceased.
(3.) In the estate duty proceedings that followed the death of the deceased, the accountable persons included the value of a one-seventh share in the partnership business in the estate of the deceased which along with the movables was declared at Rs. 1,05,236. The assessment was completed on January 18, 1962. The Assistant Controller of Estate Duty by applying the provisions of Section 10 of the Act included the following \items in the estate of the deceased: (1) The capital of Rs. 2,70,000; (2) Subsequent accretion in the form of profits till the date of death of the deceased; and (3) 6/7th share of goodwill, the quantum of goodwill being computed at Rs. 1 lakh. The principal value of the estate was determined at Rs. 8,43,214.;