Bombay High Court
Shri Damodar Gopaldas ... vs The Controller Of Estate ... on 28 February, 2017
Bench: V.A. Naik
EDR 2/01 1 Judgment
IN THE HIGH COURT OF JUDICATURE AT BOMBAY,
NAGPUR BENCH, NAGPUR.
ESTATE DUTY REFERENCE No. 2/2001
Shri Damodar Gopaldas Chandak, Nagpur. APPLICANT
.....VERSUS.....
The Controller of Estate Duty, Nagpur. RESPONDENT
None for the applicant.
None for the respondent.
CORAM :SMT.VASANTI A NAIK AND
V.M. DESHPANDE, JJ.
DATE : 28 TH FEBRUARY, 2017.
ORAL JUDGMENT (PER : SMT.VASANTI A NAIK, J.)
This is a reference under the provisions of the Estate Duty Act.
2. As per the facts of the case Shri Gopaldas was a partner in a
firm known as M/s Chandak Electric Company, wherein he had 35%
share at the time of his death. Gopaldas died on 19.04.1972 leaving
behind him large dutiable estate. The deceased owned individual
properties and was also a member of the Hindu undivided family. The
deceased had 1/7th share in the bigger H.U.F. The Estate Controller
under the Estate Duty Act found that the partnership firm was located in
a busy business locality and the firm was engaged in electrical goods on
wholesale basis. The Estate Controller found that the firm was receiving
very good profits and for the assessment years 1970 to 1972-73, the firm
had earned profits of Rs.3,21,203/-. The Estate Controller held that the
firm had established goodwill and considering the share of the deceased
EDR 2/01 2 Judgment
at 35% of the goodwill, a sum of Rs.28,105/- was included by the
Assistant Controller in the dutiable estate. On appeal, the addition of the
amount for the dutiable estate was deleted by the Appellate Controller by
relying on the judgment of the Punjab & Haryana High Court, reported in
1996 ITR 303. The Appellate Controller held that the Estate Controller
was right in holding that the firm had goodwill. The Appellate Controller
agreed that there was goodwill but, held that the amount of goodwill was
not quantified and, therefore, he deleted the addition of Rs.28,105/-. The
department was aggrieved by the decision of the Appellate Controller and
it filed an appeal before the Income Tax Appellate Tribunal. By an order,
dated 13.07.1976, the Income Tax Appellate Tribunal allowed the appeal
of the department after holding that the goodwill, if any, of the business
in which the deceased was a partner, passes on his death. Since the
Appellate Controller had not decided the other alternate contention raised
on behalf of the accountable person as he had deleted the whole of the
addition on the footing that the goodwill of the business did not pass on
the death of the deceased, after setting aside the order of the Appellate
Controller, the matter was remanded by the Tribunal to the Appellate
Controller for deciding the other contentions raised by the accountable
person. A reference is made by the Hon'ble Tribunal of the question,
"Whether on the facts and in the circumstances of the case, the share of
the goodwill of a deceased partner in the assets of a firm passes on his
death under the Estate Duty Act ?"
EDR 2/01 3 Judgment
3. Though at the relevant time, there was no judgment of the
Hon'ble Supreme Court or the Bombay High Court on the question
referred to us, the question involved in the reference stands answered
against the accountable person and in favour of the Revenue. The
Hon'ble Supreme Court has, in the judgment reported in (1986)26
Taxman 348 (SC) (Controller of Estate Duty Versus Smt.Mrudula
Nareshchandra), held after considering the judgments rendered by the
various High Courts including, the Punjab & Haryana High Court, Gohatti
High Court, Bombay High Court, Madras High Court and others, that the
share of the deceased in the partnership did not evaporate or disappear
on the death of the deceased and it went together with the other assets
and the same should be valued in the manner contemplated under Rule
7(c) of the Estate Duty Rules, 1953. The Hon'ble Supreme Court upheld
the judgment of the Calcutta High Court in the case of Annaraj Mehta and
Deoraj Mehta. The question was answered by the Hon'ble Supreme Court
in favour of the revenue after clearly recording a finding that the share of
the deceased in the partnership firm including his share in the goodwill is
required to be valued under Rule 7(c) of the Estate Duty Rules and
included in the estate, for the levy of estate duty even though goodwill as
such cannot be valued. As the question referred to us stands answered in
favour of the revenue by the Hon'ble Supreme Court, it would not be
necessary to again answer the same. As per the judgment of the Income
EDR 2/01 4 Judgment
Tax Appellate Tribunal, the Appellate Controller would be free to decide
the other contentions raised by the accountable person before him.
4. The reference stands disposed of in the aforesaid terms with
no order as to costs.
\
JUDGE JUDGE
APTE
