Law:

Section:

Section 5 of the Estate Duty Act, 1953 - Property passing on death - Whether right to receive share income from managing agency business is property - Held, yes - Whether, therefore, contention of accountable persons that managing agency agreements were only contract of personal service and, therefore, they had no goodwill could not be accepted - Held, yes - Whether, in view of aforesaid, goodwill valued by Board on basis of actual profits earned by managing agency from which deceased had a right to receive share of income, could be regarded as 'property' passing on death of deceased - Held, yes FACTS The Deputy Controller determined the principal value of the estate of deceased at Rs. 19,34,884 which included, inter alia, (1) Rs. 1,20,826 representing the deceased's 1/6th share of the goodwill in the managing agency firm 'R', and (2) Rs. 57,168 representing the deceased's 1/12th share of goodwill in the managing agency firm of 'B'. This was objected to by the accountable persons and they preferred an appeal to the Central Board of Direct Taxes, contending that the goodwill was an element relating to the business and could not, therefore, attach to a managing agency which was a contract of personal service, and that, in any event, as goodwill had no saleable value nor was it transferable, no value could be said to attach to it. The Board rejected the contentions of the accountable persons and held that goodwill in the two managing agency firms was undoubtedly property passing on death of the deceased and, therefore, it had been rightly included in the principal value of the estate. On appeal, the Board, however, revalued the goodwill of the two managing agency firms on the basis of the actual profits earned by the two firms during the seven years as against the estimated profits adopted by the Deputy Controller. On this basis the deceased's 1/6th share of the goodwill in 'R' company was determined at Rs. 94,402 and the deceased is 1/12th share of the goodwill in 'B' company was determined at Rs. 53,707. On reference : HELD The deceased had a right to receive the share of income from the managing agency business and that it was clearly property. As held in M.E.…

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