Law:

Section:

Section 9 read with sections 27 and 5, of the Estate Duty Act, 1953 - Gift - Made within statutory period - Deceased was a partner in a firm along with three other partners, who were his sons - In partnership deed there was no restrictive clause relating to right of outgoing or deceased partner in goodwill of firm - Three days prior to his death, deceased retired from that firm and took Rs. 50,000 as his share in goodwill of firm though his actual share was Rs. 1,95,000 - Whether difference between amount due and received by deceased as his share of goodwill was property passing on his death, and was, therefore, to be included in principal value of his estate -Held, yes Facts The deceased was a partner alongwith Ms three sons in a firm. In the partnership deed there was no restrictive clause relating to the right of outgoing or deceased partner in the goodwill of the firm. Three days prior to his death, the deceased retired from the partnership business. It was followed by a dissolution deed executed on the same day and the firm was reconstituted by the remaining partners thereafter. In terms of the dissolution deed, the deceased received a sum of Rs. 50,000 from the continuing partners in lieu of his share in the goodwill of the firm. In computing the principal value of the property left by the deceased the Assistant Controller determined the deceased's share in the goodwill of the firm at Rs. 1,95,000 and taking resort to section 9(1) he held that the difference between Rs. 1,95,000 and Rs. 50,000 represented gift in favour of his sons and was liable to be included in the estate of the deceased as the property passing on his death. On appeal, the Tribu- nal, however, reversed the decision taking the view that pro- visions of section 9 or Explanation 2 to section 2(15) were not attrac- ted. According to it, in the partnership deed, there was no clause which entitled a retiring or outgoing partner to claim his share in the goodwill of the firm. In such a situation, the question of good- will between the partners was to be decided by mutual agreement or under the general provisions of the Indian Partnership Act, 1932. It held that continuing partners agreed to…

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