Law:

Section:

Section 36, read with section 40, of the estate duty act, 1953-Valuation-goodwill of partnership firm-Deceased partner in a firm of engineers and contractors-assistant controller calculated, for including deceased's share in dutiable estate, firm's goodwill at Rs. 4,71,000 by taking multiple of three years' purchase of its average net profit and deducted therefrom interest at 9 per cent on average proportionate capital invested and remuneration at Rs. 36,000 for 6 working partners-Tribunal reduced goodwill to Rs. 3,28,700 by enhancing partner's remuneration to Rs. 8,11,000 and upheld inclusion of deceased share in his dutiable estate-Whether firm had any goodwill and could be valued for purposes of estate duty-Held, yes-Whether method of valuation adopted by tribunal for valuing firm's goodwill correct in law-Held, yes Facts The deceased N died on 29-12-1968. At the time of his death, he was a partner in the firm GD, consisting of 12 partners and carrying on business of contractors or engineers, in which his share was 12 per cent of its profits and losses. The Assistant Controller, while computing the value of his estate, included in it the value of his share of Rs. 56,520 in the firm's total goodwill of Rs. 4,71,000, which was determined by taking a multiple of three years' purchase of the average net profit of Rs. 1,50,941. The net profit was computed by working out the firm's average profits for three years, viz, 1966-67,1967-68 and 1968-69 and, after deducting therefrom, interest at the rate of 9 per cent on the average proportionate capital invested and remuneration of Rs. 36,000 at Rs. 6,000 per annum for 6 working partners. On appeal, the Appellate Controller reduced the value of goodwill by allowing an interest of 10 per cent on the average proportionate capital employed. On further appeal before the Tribunal, the accountable person contended (i) that the firm had no goodwill as it had been dissolved thrice between 1959 and 1968; (ii) that a firm of this nature did not enjoy any goodwill at all because its business depended upon the personal skill and labour of the partners; and (iii) that the rate of interest at the rate of 10 per cent was low and the…

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