RANGANAYAKI AMMAL Vs. CONTROLLER OF ESTATE DUTY

JUDGEMENT

(1.) ONE Bheema Naidu died on 25-11-1953, leaving behind him his widow, a widowed daughter-in-law and several grand-children. An account of the estate duty with regard to the property passing on the death of the said Bheema Naidu was furnished by his widow and daughter-in-law as accountable persons under the Estate Duty Act, 1953 (hereinafter referred to as the Act) to the Deputy Controller of Estate Duty, Madras. The Deputy Controller determined the principal value of the estate at Rs. 19,34,884, which included, inter alia, (1) Rs. 1,20,826 representing the deceased's 1/6th share of the goodwill in the managing agency firm of M/s. Rangaswami Naidu and Sons and (2) Rs. 57,168 representing the deceased's one twelfth share of goodwill in the managing agency firm of M/s. R. Bheema Naidu and Co. This was objected to by the accountable persons and they preferred an appeal to the Central Board of Direct Taxes under Section 63 of the Act.

(2.) IT was contended before the Board that the Deputy Controller erred in attributing any goodwill to the Managing agency firms of M/s. Rangaswami Naidu and Sons and M/s. Bheema Naidu and Co., in which the deceased was a partner, that the goodwill was an element relating to the business and could not therefore attach to a managing agency which was a contract of personal service, and, that, in any event, as goodwill had no saleable value nor was it transferable, no value could be said to attach to it. IT was also contended that the managing agents were prohibited by law from transferring their office without the approval of the company, that any change in the constitution of the managing agency firm should also have the approval of the Central Government, that the managing agency has no goodwill at all and that in any event it cannot be taken as property passing on death. The accountable persons also urged that the basis of valuation of goodwill adopted by the Deputy Controller was erroneous in so far as it relates to the deceased's share of remuneration, for the unexpired term of the managing agency agreement.

(3.) ON the question of valuation, as already stated, the Deputy Controller valued the good-will by estimating the profits which would have been earned for the period of seven years. But the Board, on appeal, revalued the good-will on the basis of actual profits. Therefore the accountable persons cannot validly raise any objection to the method of valuation. As a matter of fact the learned counsel for the accountable person was not in a position to suggest any other alternative method of valuation of the good-will. In this view both the questions have to be and are answered in the affirmative and against the accountable persons. The accountable persons will pay the costs of the Revenue. Counsel's fee Rs. 250.