High Court Of Punjab & Haryana
Bikramjit Singh vs. Controller Of Estate Duty
Section ED 2(15)
G.S. Singhvi & Kiran Anand Lall, JJ.
ED Ref. No. 1 of 1988
13th August, 2002
Counsel Appeared :
Nagpal, for the Accountable person : Dr. N.L. Shardha, for the Controller
JUDGMENT
G.S. SINGHVI, J. :
On an application filed by the petitioner (hereinafter described as the accountable person), the Tribunal, Amritsar Bench, Amritsar (for short, “the Tribunal”), referred the following question of law for the opinion of this Court under s. 64(1) of the Estate Duty Act, 1953 (for short, “the Act”) : “Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the firm, M/s Khanna and Hari Raj, had a goodwill which passed on the death of Shri Shivraj Singh ?”
2. For the purpose of deciding the aforementioned question, we may notice the relevant facts. M/s Khanna and Hari Raj of which the late Shri Shiv Raj Singh (predecessor-in-interest of the accountable person) was a partner, was carrying on business as selling agent of vegetable products of M/s I.V.P. Ltd. For this purpose, it had entered into an agreement with M/s I.V.P. Ltd. some time in November, 1972. The same was renewed from time to time. The last renewal was made on 24th Sept., 1980, was to last till 31st Oct., 1987. The same was to remain effective up to 31st Oct., 1987. Shri Shiv Raj Singh died on 30th April, 1980, i.e., during the currency of the agreement. By an order dt. 20th Aug., 1981, the Asstt. CED, Jalandhar (hereinafter described as “the A.C.E.D.”), assessed the estate of the late Shri Shiv Raj Singh at Rs. 9,12,964 by including the value of his share in the goodwill of M/s Khanna and Hari Raj. The appeal filed by the accountable person under s. 62(5) of the Act was partly allowed by the Appellate CED, Jalandhar (hereinafter described as “the Appellate Controller”). He upheld the decision of the A.C.E.D. that the firm, M/s Khanna and Hari Raj, had a goodwill and the late Shri Shiv Raj Singh had the share in the same. He further held that the share of Shri Shiv Raj Singh in the goodwill of the firm could be legitimately counted for the purpose of estate duty. He, however, reduced the value of the share of the deceased in the goodwill from Rs. 3,36,155 to Rs. 1,10,000. The accountable person and the A.C.E.D. filed separate appeals against the order of the Appellate Controller, which were disposed of by the Tribunal by a common order dt. 23rd Oct., 1986. The accountable person applied for rectification of the so-called error in the order of the Tribunal. His application was rejected by it vide order dt. 12th Jan., 1988. Shri S.C. Nagpal argued that the findings recorded by the Tribunal on the issue of goodwill of the firm are self-contradictory and are based on misreading of evidence produced by the parties and, therefore, the question framed by the Tribunal may be answered in favour of the accountable person. He referred to paras 7 and 14 of the order dt. 23rd Oct., 1986, and para 4 of the order dt. 12th Jan., 1988, to show that the Tribunal was never certain about the goodwill of the firm—M/s Khanna and Hari Raj and, therefore, there was no occasion for it to uphold the finding recorded by the Appellate Controller.
Dr. N.L. Shardha, counsel for the respondent, argued that even though the orders passed by the Tribunal are not happily drafted, the finding of fact recorded by the A.C.E.D. and the Appellate Controller on the issue of goodwill of the firm—M/s Khanna and Hari Raj, and the share of the late Shri Shiv Raj Singh in the value of the goodwill does not give rise to any question of law which may require determination under s. 64(1) of the Act. He referred to para 5 of the order dt. 23rd Oct., 1986, and submitted that after having affirmed the findings recorded by the Appellate Controller that M/s Khanna and Hari Raj had the goodwill, there was no occasion for the Tribunal to make observations in paras 7 and 14 of the said order suggesting that counsel for the accountable person had not challenged the finding on the issue of goodwill of the firm or to make an observation in para 4 of the order dt. 12th Jan., 1988, that existence of goodwill is prima facie established.
We have thoughtfully considered the respective submissions. In CED vs. Smt. Pushpa Anand (1999) 157 CTR (P&H) 108 : (1999) 235 ITR 534 (P&H), this Court considered a similar question referred by the Tribunal. After making a reference to the decisions IRC vs. Muller and Co.’s Margarine Ltd. (1901) AC 217 (HL); Rustom Cavasjee Cooper vs. Union of India (1970) 40 Comp Cas 325 (SC); CIT vs. B.C. Srinivasa Setty (1981) 21 CTR (SC) 138 : (1981) 128 ITR 294 (SC); State vs. Prem Nath (1977) 106 ITR 446 (P&H)(FB); CED vs. Mrudula Nareshchandra (1986) 58 CTR (SC) 74 : (1986) 160 ITR 342 (SC); S.C. Cambatta & Co. (P) Ltd. vs. CEPT (1961) 41 ITR 500 (SC); Smt. Vindoor Bai vs. CED (1981) 20 CTR (All) 175 : (1981) 132 ITR 421 (All); CED vs. Kanta Devi Taneja (1980) 19 CTR (Gau) 160 : (1981) 132 ITR 437 (Gau); Mahabir Prasad Poddar vs. CED (1976) 104 ITR 612 (Patna); Smt. Kamlawati Raizada vs. CED (1976) 105 ITR 703 (All) and K.A. Subramaniam vs. CED (1962) 46 ITR 1 (Mad)(ED), the Court culled out the following principles (p. 542) : “(i) The goodwill of a business is an intangible asset. It is the advantage or reputation and location found with the customer. It is that component of the total value of the undertaking which is attributable to the ability of the concern to earn profits over a course of years because of its reputation, location and other features. (ii) The goodwill is comprised of a variety of elements. The location, the service, the standing of the business, the honesty of those who run it are some of the factors which contribute to the goodwill of the business. (iii) The goodwill is acquired during the course of a number of years of business. It is founded on the belief and faith of the customer. It rarely springs from the very inception of the firm. (iv) Under the ED Act each and every right which passes on death has to be valued on the assumption that there is a willing purchaser for the right or property. (v) The interest of a partner in a partnership firm is property within the meaning of s. 2(15) of the Act. Such interest extends to a share in all partnership assets including goodwill. (vi) On death of a partner his interest in the entire unit of the firm including goodwill passes and the value of the goodwill has to be added to the principal value of the estate for the purpose of the Act of 1953.”
In the light of the above, we may now examine whether the finding recorded by the Tribunal that firm M/s Khanna and Hari Raj, had goodwill and the share of the late Shri Shiv Raj Singh was countable for the purpose of assessing his estate under the Act. A careful reading of the order dt. 23rd Oct., 1986, shows that after making a reference to the basic facts, the Tribunal approved the reasons assigned by the Appellate Controller for confirming the finding recorded by the A.C.E.D. that M/s Khanna and Hari Raj was having goodwill and then proceeded to examine the ancillary issue relating to the value of Shiv Raj Singh’s share in the goodwill. In his order, the Appellate Controller noted that M/s Khanna and Hari Raj of which the late Shri Shiv Raj Singh was a partner had been working as a selling agent of the vegetable products of M/s I.V.P. Ltd., since 1972 and the agreement entered into between the two was being renewed from time to time. He noted that as per cls. 11 and 12 of the agreement which was in force at the time of demise of Shiv Raj Singh, the agreement could be terminated before the expiry of five years, but, in fact, it was never terminated. He further noted that the agency given to the firm—M/s Khanna and Hari Raj, was not transferable without the consent of M/s I.V.P. Ltd., and, ultimately, the agency was terminated in 1983 because M/s I.V.P. Ltd., had discontinued manufacturing of vegetable products.
In our opinion, the finding recorded by the Appellate Controller on the issue of goodwill of the firm—M/s Khanna and Hari Raj, cannot be termed as perverse and the mere fact that the Tribunal made some casual observations in its order dt. 23rd Oct., 1986, about the concession allegedly made by counsel for the accountable person and, later on, diluted the same by observing that there is no positive material to justify the said observation does not call for interference by this Court. Hence, the question referred by the Tribunal is answered in favour of the Department and against the accountable person.
[Citation : 265 ITR 606]
