B.J.DIVAN, J. - (1.) BOTH these references arise out of the same order of the Tribunal. At the instance of the Revenue, one question arising out of the decision of the Tribunal has been referred to us and that is Estate Duty Reference No. 1 of 1975. At the instance of the accountable person, question No. 1 has been referred to us and that is ED Ref. No. 2 of 1975. Since both these questions arise out of the same order of the Tribunal, we will dispose of both of them by this common judgment. Questions Nos. 1 and 2 referred to us are as under : "(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the sum of Rs. 56,500 being the value of the share of the deceased in the goodwill of the firm, Harjivandas Hathibhai, was not liable to be included in the principal value of the estate of the deceased ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the aforesaid amounts totalling to Rs. 87,000 gifted by the deceased to his relatives were liable to be included in the principal value of the dutiable estate under S. 10 of the Act ?"
(2.) THE facts leading to these two references are as follows : One Harjivandas Hathibhai died on 25th May, 1967, leaving behind a will dt. 20th March, 1967. The deceased during his lifetime derived income from the firm of Harjivandas Hathibhai in which he was a partner having four annas or twenty five per cent share, interest, dividend, etc. At the time of his death his estate consisted of interest in the said partnership firm, shares, insurance, a bungalow at Alkapuri, Ashram Road, Ahmedabad, and one house and a shop in village Anjol. The deceased also had a share in the HUF house at village Anjol. The Asstt. CED, Ahmedabad, included the sum of Rs. 56,500 being the value of four annas share of the deceased in the goodwill of the firm of Harjivandas Hathibhai in the dutiable estate. During his lifetime the deceased had given various amounts by way of gift to different members of his family, namely, to his sons, daughters and to one Jamnaben and these gifts were deposited by the respective donees concerned within a few days after they received these amounts in the firm of Harjivandas Hathibhai in which the deceased was a partner. The Asstt. Controller held that these amounts aggregating to Rs. 87,000 were liable to be included in the dutiable estate under s. 10 of the ED Act. On appeal by the accountable person, the Appellate Controller confirmed the orders of the Asstt. Controller and thereafter the accountable person filed further appeal before the Tribunal. The Tribunal, following the decision of this High Court in Smt. Mrudula Nareshchandra vs. CED (1975) 100 ITR 297 (Guj), held that the amount of Rs. 56,500 was not liable to be included in the dutiable estate. However, as regards the inclusion of the other amount of Rs. 87,000, the Tribunal, following the decision of this High Court in Sakarlal Chunilal vs. CED (1975) 98 ITR 610 (Guj), confirmed the view taken by the authorities below and thereafter one question has been referred to us at the instance of the Revenue, being the question in Ref. No. 1 of 1975, and the other question has been referred to us at the instance of the accountable person, being the question in Ref. No. 2 of 1975.
(3.) AS regards the question of goodwill, there is a peculiar clause in the partnership deed of Harjivandas Hathibhai and that clause is cl. 8 of the partnership deed. The translation of that clause, the original of which is in Gujarati, is in these terms : "If any partner retires or goes out for any reason from our partnership or for any reason goes out or expires, then, at that time, no goodwill shall be considered of the firm and nothing shall be payable towards goodwill to such partner." In Mrudula Nareshchandra vs. CED (supra), a Division Bench of this High Court was concerned with a clause in the relevant partnership deed, which was as follows : "The firm shall not stand dissolved on death of any of the partners and the partner dying shall have no right whatsoever in the goodwill of the firm." It was on the latter part of this clause in the partnership deed that emphasis was placed by the Division Bench and it was held that a partner in a firm has a marketable interest in all the capital assets of the firm including the goodwill even during the subsistence of the partnership. Interest in goodwill is property within the meaning of S. 2(15) of the ED Act. But the goodwill of a firm standing by itself cannot earn any income. In a case where it is specifically 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 cesser of interest in the goodwill, on the death of one of the partners, cannot be measured in terms of S. 40. Therefore, such benefit is not liable to estate duty under S. 7. The Division Bench considered all the decisions of the different High Courts and of the Supreme Court available till then to come to its conclusion. T. U. Mehta, J., speaking for the Division Bench, observed : "We have already shown above that the word ' passes ' involves the concept of mobility and change of hands resulting from the continuity of the identity of rights in the property. But, if the rights of the deceased cease to exist on the happening of a particular event giving rise to fresh rights in favour of those who do not derive their interest as the representatives of the deceased, it cannot be said that the property ' passed ' within the meaning of S. 5." Thus, both from the point of view of S. 7 as well as from the point of view of S. 5 and S. 40, the position was considered by the Division Bench and it was held on the particular clause of the partnership deed in Mrudula Nareshchandra's case (supra) that there was no liability to pay estate duty so far as the share in the goodwill of the firm was concerned.;