TMI Blog1976 (3) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... ance this reference has been made. The deceased had two sons, Mahabir Prasad and Gopi Krishna. He was the proprietor of the proprietary firm doing business under the name and style of M/s. Mahabir Prasad Gopi Krishna. On the 23rd of May, 1959, the decased made a cash gift of Rs. 25,000 to each of the two sons. The two donees deposited the gifted amounts in their bank accounts. Thereafter, on the 26th of May, 1959, Gopi Krishna withdrew Rs. 25,000 from his bank and invested the same in the proprietary firm of the deceased. So did the other son, Mahabir Prasad, on the 30th of May, 1959. The proprietary firm continued till the 30th of September, 1959, and with effect from October, 1959, it was converted into a partnership firm with the deceased and his two sons as partners during the continuance of the partnership, the deceased made the following further gifts of Rs. 15,000 each to his two sons : Date Mahabir Prasad Gopi Krishna 10-10-60 5,000 5,000 16-08-61 5,000 5,000 1-10-62 5,000 5,000 Total ---------------- ---------------- 15,000 15,000 ----------------- ----------------- The aforesaid amount of Rs. 30,000 gifted to the two sons was invested by the donees in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal at Rs. 10,000 only in which the deceased had one-third share and his share in the value of the goodwill alone was included in the estate of the deceased. To deal with the second question first, I do not find any infirmity in the Tribunal's appellate order holding that the partnership firm had a goodwill which could be valued. The contention of the accountable person was that the nature of the business carried on by the partnership firm, which dealt only in kirana goods, was such that it should not be held to have any goodwill at all. The Tribunal relying upon a decision of the Supreme Court in the case of S. C. Cambatta and Co. (P.) Ltd. v. Commissioner of Excess Profits Tax held that the goodwill of a business depended upon a variety of circumstances or a combination of them. The location, the service, the standing of the business, the honesty of those who ran it, the lack of competition and many other factors went individually or together to make up the goodwill though locality always played a considerable part. But locality is not everything. The power to attract customers depends on one or more of the other factors as well. Applying the aforesaid test, the Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that case the firm was continued after the death of the partner, who had assigned his share, and it was, therefore, held that no specific share in the goodwill passed on to his heirs as he did not own any specific share in the goodwill of the firm. It was further held that under section 5 of the Estate Duty Act duty is leviable only upon the principal value of property which passes on his death and goodwill has no value in a going concern of partnership. In the case of Smt. Mrudula Nareshchandra it was held that in a case where it is specifically stipulated between the partners of a firm that on the death of any of the partners the partnership shall not stand dissolved and that the heirs of the deceased partner shall have no right whatsoever to claim any share in the goodwill of the firm, the benefit arising to the other partners on the cesser of interest in the goodwill, on the death of one of the partners, cannot be measured in terms of section 40, and, therefore, such benefit is not liable to estate duty under section 7 of the Act. In the instant case there is nothing in the statement of the case which would go to show that there was any stipulation amongst the partners of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be applied to cases which may be sought to be covered by the provisions of the deeming clause under section 10. In the case of George Da Costa the Supreme Court has laid down that the crux of section 10 of the Act lies in two parts: (i) the donee must bona fide have assumed possession and enjoyment of the property which is the subject-matter of the gift to the exclusion of the donor, immediately upon the gift, and (ii) the donee must have retained such possession and enjoyment of the property to the entire exclusion of the donor or of any benefit to him by contract or otherwise. Both these conditions are cumulative. Unless each of these conditions is satisfied the property would be liable to estate duty under section 10 of the Act. The second part of section 10 has two limbs; the deceased must be entirely excluded, (i) from the property, and (ii) from any benefit by contract or otherwise. The words " by contract or otherwise" in the second limb of the section will not control the words " to the entire exclusion of the donor " in the first limb. The first limb may be infringed if the donor occupies or enjoys the property or its income, even though he has no right to do so which h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question is whether the donor has been entirely excluded from the subject-matter of the gift, that is the single fact to be determined, and, if he has not been so excluded, the eye need look no further to see whether his non-exclusion has been advantageous or otherwise to the donee. In that case, while it was not disputed that the son had assumed bona fide possession and enjoyment immediately upon the gift to the entire exclusion of the father, he had not, on the facts, thenceforth retained it to the father's entire exclusion. It was, therefore, held in Chick's case that the property would be deemed to have passed on the death of the donor. These principles have been followed in all the cases cited at the Bar either in support of the case of the accountable person or that of the revenue. Learned counsel for the accountable person placed reliance on Munro's case and on the cases of Controller of Estate Duty v. S. Aswathanarayana Setty , a judgment of the Mysore High Court which was approved by the Supreme Court in the case of Controller of Estate Duty v. C. R. Ramachandra Gounder, Commissioner of Income-tax and Controller of Estate Duty v. N. R. Ramarathnam, Controller of Estate Du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this property and upon dissolution of the partnership to a share in the money representing the value of the property. Since a firm has no legal existence, the partnership property is vested in all the partners and in that sense every partner has an interest in the property of the partnership. During the subsistence of the partnership, no partner can deal with any portion of the property as his own. Nor can he assign his interest in a specific item of the partnership property to any one. The whole concept of partnership is to embark upon a joint venture and for that purpose to bring in as capital money or even property including immovable property. Once that is done whatever is brought in would cease to be the exclusive property of the person who brought it in. It would be merely the trading asset of the partnership in which all the partners would have interest in proportion to their share in the joint venture of the business of partnership. The person who brought it in would, therefore, not be able to claim or exercise any exclusive right over any property which he has brought in, much less over any other partnership property. It is true that even during the subsistence of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the case of gifts made by the deceased, who was a partner in the firm. A sum of Rs. 1,00,000 which was the subject-matter of gift was transferred by crediting the amount in each of the son's accounts with the firm which thenceforward became liable to the sons for payment of that amount and the interest thereon; the possession which the donor could give was the legal possession which the circumstances and the nature of the property would admit and this the donor had given. In the case of N. R. Ramayathnam the Supreme Court was dealing with gifts made by the deceased to his three sons and a daughter who were already partners in a firm which carried on money-lending business. The transfers were made by adjustment entries in the books of the firm against the balance to the credit of the donor in the firm and the amounts continued to remain with the firm and were utilised in the business and the deceased continued to be a partner of the firm till his death. The Supreme Court held that what was gifted was subject to the rights of the partnership and the subject-matter of the gift was retained exclusively by the donees to the entire exclusion of the donor. So also in the case of Than ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 of the Act was attracted. It will thus be seen that keeping in view the nature of interest of a partner in a partnership property and determining exactly what was the property taken under the gift, it was found in the group of cases earlier mentioned that what was transferred by way of gift was property shorn of the right which belonged to the partnership since the right which the partnership had in the property gifted was reserved, retained and excluded from the gift. On the contrary, the latter group of cases were cases in which the gifts had been made of cash absolutely which was later invested by the donees in a firm in which the deceased donor was also a partner. In such circumstances, it has been rightly held that it could not be said that the donees retained the possession of the gifted property to the exclusion of the donor. Applying these well-established principles, there can be no manner of doubt that the Tribunal was perfectly justified in coming to the conclusion that the bona fide possession,and enjoyment of the property gifted was not assumed by the sons and thenceforward retained by them to the entire exclusion of the deceased. In the present case the amou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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