K A SUBRAMANIAM AMBIS CAFE Vs. CONTROLLER OF ESTATE DUTY MADRAS

JUDGEMENT

(1.) THESE two references arise under S. 64 (1) of the Etate Duty Act during the course of assessment to duty of the estate left by the late K. S. Ambi Iyer who was running a hotel at Madrus. He died in a railway accident on 27th september 1954. He is survived by his two sons who were living with him. One of them was aminor at the time of death. They are now the accounting persons for the purpose of levy of estate duty. The deceased Ambi Iyer stared life by establishing a hotel at Vellore originally under the name of Ambikalunch home and later on as Ambi's cafe. The business prospeed and in couse of time a meals section and lodging house were added to the coffe hotel. In 1935, a branch of the business was opened at broadway, Madras, very near the Law college where the premises were taken on lease. This business also flourishedf. Some years thereafter the business at vellore was entrusted to other persons and ultimately it was closed doen. During the course of his life, Ambi Iyer acquired several items of moveable and immoveable properties all of them together being now assessed to the value of Rs. 2,90,958. This valuation of the assets is not now contested. It also not disputed that the properties were acquired out of the income income from the hotel business. But the accounting person contested before the assistant Controller of Estate Duty that the business run by the deceased was a joint family business started with aid of ancestral nucleus in which the sons of the deceased (accountable persons) had an interest along with their father and the entire property having survived to them the interest of the deceased which ceased on his death should be evaluated in accordance with the provisions of S. 7 of the Estate Duty Act. They also stated that the goodwill of the business should be valued at Rs. 1,000.

(2.) THE Assistant Controller, however, rejected the case that the business run by the deceased was a joint family concern and he therefore brought to duty the entire estate left by the deceased Ambi Iyer as his seprate property. The accountable persons who originally conceded that the goodwill attached to the business of Ambi's cafe had a value and estimated the same at Rs. 1,000, took up a different stand before the Assistant Controller namely that the goodwill of the business had no vaule at all. The Assistant Controller refused to accept this plea and taking the average annual income on the basis of the profits earned for years preceding the death of Ambi Iyer, he valued the goodwill attached to the business at three years' purchase and assessed it in a round figure of Rs. 45,000. There was an appeal by the accountable persons to the Central Board of revenue affirmed the view of the Assistant Controller that the hotel business run by the deceased and the properties acquired from and out of the profits thereof were hisw seprate properties the accounting persons having no interest therein during the lifetime of the deceased. The Board, however, held that the value fixed by the assistant Controller for the goodwill of the business was excessive in view of the fact that the premises where the business was run did not belong to the deceased, but was merely held under a precarious tenancy and reduced the value of the goodwill to Rs. 25,000/ -. At the request of the accountable persons the board has referred for the opinion of this Court the following two questions which respectively conform to the subject of reference in T. C. No. 109 of 1958 and 81 of 1960.

(3.) QUESTION No. 1: As stated earlier there is no controversy that the properties left by the deceased were acquired by the late Ambi Iyer out of the profits from his coffe hotel business run by him at Vellore and at madras. The case for the business at Vellore was provided from and out of the saleproceeds of an ancestral land owned by the deceased at konunseri near Palghaf and that therefore the properties acquired from out of the profits of the business would be joint family properties. It is clear from the evidence, that Ambi Iyer had obtained at a partition a small area of agricultural land in Konnuseri in south Mallabar Dt. On 30th semtember 1924, that property was sold for asum of Rs. 600/- The need for the sale is not disclosed in the document. One Rao Saheb A rni srinivasa Mudaliar who was at one time chairman of Arni Municipality has sworn to an affidavit that the coffe hotel business at Vellre was started by the deceased Ambi Iyer in 1924, on his advice and that he advance loans on occasions to the deceased Ambi Iyer. There other affidavits are also in evidence. The first is by sivakrishana Iyer aged about 83 years who is the paternal uncle of the deceased. He catecagorically states that Ambi Iyer, with the proceeds of the sale of his family property in malabar started the coffe hotel business at Vellore. The brother in law of the deceased one K. N. Krishna Iyer who subsequent took on lease the hotel business at Vellore has sworn to the same fact in his affidavit. K. R. Swami Iyer a cousin of the associated wiuth the latter right from the beginning when he started his business at Vellore confirms that statement.