CONTROLLER OF ESTATE DUTY Vs. BISWANATH RUNGTA

JUDGEMENT

(1.) THIS is a reference under s. 64(1) of the ED Act, 1953. The question referred to this Court is :

(2.) THE circumstances under which the above question comes up for consideration are hereinafter related in brief. One Shrimati Shanti Devi Rungta died on 26th Sept., 1958. THE deceased held 440 ordinary shares of the face value of Rs. 100 each in M/s Minerals and Metals (P) Ltd. It is not disputed that the total of ordinary shares issued by M/s Minerals and Metals (P) Ltd. was 2,020 shares of Rs. 100 each fully paid up. It is not also disputed that the shares were not quoted in the stock exchange. In determining the value of the shares held by the deceased, the Asstt. CED proceeded to determine the break-up value of the shares on the basis of the net assets of the company as disclosed in the balance-sheet as on 18th June, 1958. He computed the net assets of the company, firstly, at Rs. 4,05,034. In arriving at the figure, he did not allow any deduction for proposed dividend, which was shown as liability in the balance-sheet. As the balance-sheet did not include any value for the goodwill of the company, he estimated the value of the goodwill at Rs. 1,10,000 and added back the same to the value of the net assets as computed by him. THE method employed by the Asstt. CED in valuing the goodwill is hereinafter set out :

(3.) NOT satisfied with the small success before the Appellate CED, the accountable person preferred an appeal before the Tribunal. It was argued before the Tribunal that goodwill was no doubt an asset but because such an asset was not shown in the balance- sheet, the same should not be included for the purpose of estate duty. Alternatively, it was contended that the valuation of the goodwill taken at 4 year's purchase of the annual super-profits was in any event too high. The Tribunal partly accepted the contention of the accountable person with the following observation :