R.R. Rastogi, J. - (1.) THIS is a reference under Section 64(1) of the E.D. Act, 1953 (hereinafter referred to as " the Act "), arising out of proceedings for assessment of estate duty on the estate left by Sri Vasanda Ram who expired intestate on May 8, 1971. The respondent-accountable person, Smt. Laxmi Bai, is his widow. The deceased was a partner in M/s. Kala Ram Vasanda Ram (hereinafter referred to as " the firm ") having one-third share therein. He had a capital account in that firm and on August 28, 1970, he debited that account by Rs. 82,702.54 and in pursuance of a declaration made on August 20, 1970, impressed the same with HUF, character. Out of that amount he deposited Rs. 48,103 in the account of M/s. Vasanda Ram and Sons in the name of Vasanda Ram and Sons, HUF in the firm and further deposited Rs, 16,748 with M/s. Jamuna Lal Asan and Company, Bombay, Rs. 10,650 with M/s. Mohan Lal Hakim Chand, Ahmeda-bad, and Rs. 10,918 with M/s. Laxman Dass Kashi Ram, Surat, in the name of his joint family. In regard to the deposit of Rs. 48,103, the Asst. Controller took the view that the deposit amounted to a gift under Section 10 of the Act and since the deceased had not entirely excluded himself from benefits arising as a result of that deposit, the entire amount was liable to be added in the estate of the deceased under that section. He was further of the opinion that the throwing of this entire amount of Rs. 82,703 into the common hotch-potch would amount to a disposition made without any consideration within the meaning of Section 27 of the Act and would be taken to pass on the death of the deceased. Thus, this entire amount was included by the Asst. Controller in the estate of the deceased.
(2.) ANOTHER item with which we are concerned in this reference was the value of the goodwill of the firm. In the opinion of the Asst. Controller each business has a goodwill and the same is a property passing on the death. In so far as the determination of the value of the goodwill was concerned he took into consideration the capital and profits for five years preceding the death of the deceased, the average of which came to Rs. 22,102 and 34,574, respectively. Allowing interest on capital at 10 per cent. and Rs. 6,000 by way of salary to the partners, the super profit came to Rs. 6,364 which when capitalised at three years' purchase price came to Rs. 10,092 and to the extent of the share of the deceased this value came to Rs. 6,364 and that was included in the principal value of the estate. The accountable person appealed and disputed the inclusion of the aforesaid amounts in the principal value. The Appellate Controller took the view that Section 10 would not apply to the deposit of the amount of Rs. 48,103 but under Section 27 of the Act, the entire amount of Rs. 82,703 would be deemed to pass on the death of the deceased. As for the value of goodwill also the authority agreed with the Asst. Controller and thus the inclusion of both these amounts was confirmed. There was a further appeal taken by the accountable person before the Income-tax Appellate Tribunal. The Tribunal, disagreeing with the authorities below, took the view that throwing of one's own property into the common hotch-potch does not result in disposition, conveyance, assignment or settlement of the property and Section 27 was not attracted. In respect of the other item as well, the Tribunal took the view that no estate duty is leviable on such alleged share in goodwill, following the decision of the Punjab and Haryana High Court in CED v. Ved Parkash Jain [1974] 96 ITR 303 (P and H) and of the Gujarat High Court in Smt. Mrudula Nareshchandra v. CED [1975] 100 ITR 297 (Guj). Now, at the instance of the Controller, the following two questions have been referred by the Income-tax Appellate Tribunal, Delhi Bench-D, for the opinion of this court : " 1. Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in excluding the sum of Rs. 82,702 added by the Assistant Controller Under Section 10 and Under Section 27 of the Estate Duty Act ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in deleting an addition of Rs. 6,364 added by the Assistant Controller as deceased's share of goodwill of the firm in which he was a partner ? "
(3.) WE shall first take up question No. 2. WE have already set out-the facts relating to this question and there are two aspects of it which have to be considered. The first aspect is as to whether on the death of a partner the goodwill passes when the firm continues as before and, secondly, whether the passing of the goodwill alone would be sufficient for the inclusion thereof in the estate of the deceased. So far as the first aspect is concerned, the matter stands squarely covered by a decision of the Supreme Court and another of this court. In Smt. Kamlawati Raizada v. CIT [1976] 105 ITR 703 (All), it has been held that goodwill is an advantage which a trade or business develops by virtue of an action like the standing of the business, the personalities who are engaged in the business, its location and the like. These are qualities which a person who is carrying on the business develops by the method of doing business to attract customers. In Khushal Khemgar Shah v. Mst. Khorshed Banu, AIR 1970 SC 1147, the Supreme Court has held that unless it was established that the right, to a share in the assets of a partnership firm, of a deceased partner has been extinguished on his death, the normal position is that the share of a partner in the assets devolves on his legal representatives and that this principle will apply to the goodwill and other assets of the partnership. It is thus established that the share of a partner in a partnership firm will devolve on the legal representatives of the deceased partner in the absence of anything in the partnership deed to suggest that on such death the heirs will not get any share in any particular asset including the goodwill. There is no material in the instant case to show that there is anything in the partnership deed to suggest that on the death of a partner his heirs will not get his share in the goodwill. The same view has been taken by some other High Courts. In Smt. Surumbayi Ammal v. CED [1976] 103 ITR 358 (Mad), the view taken was that the existence of a goodwill depends on a number of considerations and merely because a person was only buying and selling common type of goods it could not be stated that there could be no goodwill at all in respect of that business. Another proposition laid down in that case was that though the accountable person factually did not get any share in the goodwill the fact that the deceased was entitled to a share was sufficient to hold that the share in the goodwill passed on his death for purposes of estate duty.;