1976 (2) TMI 52 - AT - Income Tax

Summary

Issues:
1. Whether there was a disposition within the meaning of s. 9 of the Estate Duty Act when the deceased retired from a firm without receiving his share of goodwill.

Analysis:
The deceased, a former partner of a firm, passed away, and the Assistant Controller added a sum to the estate as the deceased's share in the firm's goodwill. The accountable person appealed, arguing that since the deceased was not a partner at the time of death, there was no passing of goodwill share. The Appellate Controller agreed, stating that a unilateral act like relinquishment does not constitute a disposition under s. 9 of the Act, directing the deletion of the amount from the estate's value.

The Revenue objected, contending that the relinquishment of goodwill share by the deceased amounted to a disposition as per s. 9 and should be included. They argued that the Appellate Controller misinterpreted the scope of s. 9 and the explanation to s. 2(15) regarding property. They claimed that the relinquishment within two years of death should be considered a disposition.

The accountable person argued that relinquishment must be a conscious act to be deemed a disposition. They contended that since there was no stipulation regarding goodwill among partners, the deceased might have relinquished a non-existent right. They maintained that there was no actual gift or deemed disposition passing on the death of the deceased.

After considering the submissions, it was found that the deceased retired within two years of death without receiving his goodwill share. The Partnership Act implied that the firm's goodwill was an asset, and the deceased had a right to a share. As the deceased did not receive anything for this right, it was considered that he relinquished his share. The Revenue's argument that this constituted a disposition was rejected, as there was no evidence to show the deceased's conscious intention to extinguish the right. Without such evidence, there could be no deemed disposition passing on the death of the deceased. Therefore, the Appellate Controller's decision to delete the amount from the estate's value was upheld, and the appeal was dismissed.