CONTROLLER OF ESTATE DUTY Vs. FAKIRCHAND FATEHCHAND SACHDEV

JUDGEMENT

(1.) THE above three cases have been stated by the Tribunal under S. 64 of the ED Act, 1953, at the instance of the CED. ED References Nos. 2 of 1973 and 2 of 1974 being under Sub S. (1) of that section and ED Reference No. 9 of 1979 being under Sub S. (3) of that section. In ED References Nos. 2 of 1973 and 9 of 1979 one question each has been submitted to this Court for its determination, while in ED Reference No. 2 of 1974 four questions have been submitted. The questions referred to this Court in ED References Nos. 2 of 1973 and 9 of 1979 and the first question in ED Reference No. 2 of 1974 involve the determination by the Court of the same point in its different facets. Accordingly, we have heard these three references together and are disposing of them by a common judgment.

(2.) IT will be convenient to set out, first, the facts which have given rise to each of these three references. ED Reference No. 2 of 1973 arises out of the valuation to estate duty of the estate of one Fatehchand Nathumal Sachdev. The deceased carried on business as a stockist and distributor of the Imperial Chemical Industries (India) Pvt. Ltd. and in the purchase and sale of colours, dyes, chemicals, etc., as a sole proprietor. By a deed of partnership dt. 14th Oct., 1957, he took his son, Fakirchand, as a partner along with him in the said business which was thereafter to be carried on under the firm name and style of M/s Shorimal Fakirchand. The shares of the two partners in the profits and losses of the said partnership firm were to be equal. This deed of partnership was substituted by a new deed of partnership dt. 3rd Nov., 1967, under which the duration of the said partnership was to be at will, the share of the deceased being 25 per cent. while that of his son, Fakirchand, being 75 per cent. The deceased died on 27th Oct., 1968, and the firm thereupon stood dissolved. In the valuation to estate duty the Asst. CED included a sum of Rs. 33,750 as being the one half share of the deceased in the goodwill of the said firm. The Asst. CED held that the one fourth share of the deceased in the goodwill of the said firm passed under S. 5 of the ED Act, 1953 (hereinafter referred to as "the Act"), and the other one fourth share passed under S. 9 of the Act. On appeal, the Appellate CED upheld the order of the Asst. CED, but reduced the quantum of the share of the deceased in the goodwill to Rs. 6,750. On further appeal, the Tribunal, basing its decision upon the judgment of the Supreme Court in Addanki Narayanappa vs. Bhaskara Krishnappa, AIR 1966 SC 1300, held that no partner had any specified share in any of the assets of the firm and that since goodwill was one of the assets of the firm, it could not be said that the deceased had any specified share in the goodwill of the firm. The Tribunal, therefore, allowed the appeal and ordered the amount of goodwill to be deleted from the assessment. In view of this finding the Tribunal did not consider it necessary to decide whether 25 per cent. of the share of the deceased in the goodwill of the firm was to be included in the assessment or 50 per cent. nor did the Tribunal think it necessary to adjudicate upon the valuation of his share in the goodwill.

(3.) SO far as ED Reference No. 2 of 1974 is concerned, the deceased, Ratnaji Raghunath, was originally carrying on two businesses, one of money lending and the other in timber. From the commencement of S.Y. 2002 he took two outsiders as partners in the said timber business. This partnership continued until the end of S.Y. 2012. In the beginning of S.Y. 2013, the outsiders went out of the firm and the deceased's son, Rikabchand, joined his father as a partner, the said partnership being carried on at Poona under the firm name and style of M/s Ratnaji Raghunathji and Company. In the said partnership business the deceased had a 9 annas share and his son had a 7 annas share. The terms upon which the said partnership was to be carried on were reduced to writing in a deed of partnership dt. 16th Feb., 1957. A copy of this deed of partnership which was not on the record has by consent been taken on the record at the hearing of this reference.