Law:

Section:

Section 36 of the Estate Duty Act, 1953 - Valuation of estate - Deceased was partner in a firm which was sole distributor of well reputed brand of bidis manufactured by another firm - There was no specific agency to that effect in favour of firm - Deceased's share in firm was 56 per cent at time of his death - Whether share of goodwill of deceased was to be assessed on basis of two years, purchase of super profits - Held, yes FACTS The deceased was a partner in a firm which was the sole distributor of a well-reputed brand of bidis manufactured by another form 'M' though there was no specific agency to that effect in favour of the firm. Originally, the share of the deceased in the firm was 75% but from 1963-64, it was reduced to 56%. On death of the deceased his share in the profits of the firm during the last five years was around Rs. 5 lakhs. The ACED proceeded to assess the value of the goodwill of the firm and in doing so, calculated the share of the deceased at Rs. 2 lakhs. On appeal, the Appellate Controller allowed reduction after observing that the valuation of the goodwill at three years, super profits would be fair and proper in the circumstances of the instant case. However, the Tribunal took the view that the share of the deceased in the business being 56% at the time of the death, the same should hold good for the purpose of evaluation of goodwill also. The Tribunal, thus, held that two years' purchase of super profits basis after allowance of interest at 12% and the remuneration of Rs. 12,000 should be considered as fair and reasonable in the instant case On reference: HELD The question of goodwill of a business depends upon a variety of circumstances. It depends on the location, the standing of the business, the interest of those who run it and various other factors. In the instant case, the share of the deceased in the business of the firm was simply 56% at the time of his death. Admittedly, there was no specific agency of the firm for selling the brand of bidis. The firm was not manufacturing any bidis of its own and the whole business depended upon the sweet will of the manufacturer who had allowed distribution rights to the firm Thus, taking…

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