Law:

Section:

Section 7, read with sections 5 and 40, of the estate duty act, 1953 - Interest ceasing on death - Deceased partner in a firm - Partnership deed provided, inter alia, that on death or retirement of any partner no goodwill shall be considered of firm and nothing shall be payable towards goodwill to such partner - Whether value of deceased's share in firm's goodwill could be includible in dutiable estate - Held, on facts, no Section 10 of the estate duty act, 1953 - Gifts Where Donor Not Entirely Excluded - Deceased gifted cash to different family members who subsequently deposited the same with firm in which deceased was partner - Whether gifted amount includible in dutiable estate by virtue of section 10 - Held, on facts, no FACTS The deceased was a partner in firm H having 25 per cent share in its profits and losses. Clause 8 of the relevant partnership deed provided that "if any partner retires or goes out for any reason from our partnership or expires, then, at that time, no goodwill shall be considered of the firm and nothing shall be payable towards goodwill to such partner". The Assistant Controller, however, included in the dutiable estate a sum of Rs. 56,500, being the value of 25 per cent share of the deceased in the said firm's goodwill. During his lifetime, the deceased had gifted aggregate amount of Rs. 87,000 to different members of his family who subsequently deposited the same with the said firm H. The Assistant Controller included the same in dutiable estate under section 10. The Appellate Controller confirmed the Assistant Controller's order. On second appeal, the Tribunal deleted the amount of Rs. 56,500, holding that the share in goodwill was not includible from the point of view of section 7 and section 5 read with section 40. It, however, upheld the inclusion of Rs. 87,000 under section 10. On cross reference: HELD 1. Ordinarily, it is true that every business has some goodwill. In the case of a partnership firm, the goodwill is one of the assets of the firm. On dissolution or on the death of a partner, the deceased partner's share in the goodwill has to be ascertained and that share in the goodwill will pass to his legal representatives.…

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