TMI Blog1989 (1) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... considered as a whole and should not be bifurcated and made attributable to each business carried on by the partnership firm ?" Sri Krishnadas, a partner in Krishnadas Virbhandas, passed away on January 13, 1974. The firm was carrying on business in money-lending and textiles. In computing the value or the goodwill of the firm for purposes of the Act, the Assistant Controller of Estate Duty took into account the average profits of the firm for a period of 1 1/2 years and arrived at the value of the goodwill at Rs. 36,950 in which the deceased's 40% share was worked out to Rs. 14,780 and that was included in the principal value of the estate without any bifurcation thereof into the money-lending business and textile business. On appeal by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrived at by the Tribunal regarding the value of the goodwill based on those considerations was quite justified and proper. Attention was also invited in this connection to the decision of the Supreme Court in Rustom Cavasjee Cooper v. Union of India [1970] 40 Comp Cas 325 ; AIR 1970 SC 564. There is no dispute that since 1969, the firm of Krishnadas Virbhandas had been carrying on business in money-lending and in textiles. Likewise, it is accepted that the firm had earned profits and the average profit for one year was about Rs. 24,000 odd. The expression "goodwill" is better understood than clearly and precisely defined or described. Generally stated, it refers to the quality of a particular trade or business resulting in the attracti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nerated in the customers, though within a short time. Therefore, from the circumstance that the firm had carried on its business activities only for a period of about five years, it cannot be assumed that the firm had not acquired goodwill even during that period. We may now refer to the decisions to which our attention was drawn by learned counsel for the accountable person. In Seethalakshmi Ammal v. CED [1966] 61 ITR 317 (Mad), it was pointed out that goodwill is the magnetic quality of a particular trade or business which attracts customers as a matter of course and this springs from and is developed by various contributing factors that earn a reputation for honest dealing, quality and standard. It has also been further pointed out tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is seen that it had a very large volume of business and that is certainly attributable only to the ability, personality and business rectitude of the partners, their name and reputation, the location of the business and also the trust and confidence that had come to be reposed in the firm by those who had to resort to it in respect of their business transactions. Again, in CIT v. Official Liquidator [1985] 151 ITR 781, this court pointed out, after referring to the several constituent elements necessary to constitute goodwill, that the Tribunal had proceeded on the basis that every business undertaking should have a goodwill and that that should be ascertained. Even this decision cannot have any application, for, on a consideration of the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5, 385 ; AIR 1970 SC 564, 611 ; [1970] 3 SCR 530 at p. 602 : "Goodwill of a business is an intangible asset: it is the whole advantage of the reputation and connections formed with the customers together with the circumstances making the connection durable. 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 or in excess of normal amounts because of its reputation, location and other features : Trego v. Hunt [1896] AC 7. Goodwill of an undertaking, therefore, is the value of the attraction to customers arising from the name and reputation for skill, integrity, efficient business management or efficient service." Thus, the ability of a conce ..... X X X X Extracts X X X X X X X X Extracts X X X X
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