TMI Blog1975 (4) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... e circumstances of the case, the valuation of goodwill at Rs. 53,700 in respect of the six firms at Coimbatore, Tiruppur, Bangalore and Madras was valid in law ? " Before dealing with the question, it is necessary to set out certain facts relating to the partnership and the terms and conditions thereof. The deceased was a partner in six firms of which two were in Bangalore, two in Tiruppur and one each in Coimbatore and Madras. All these partnerships are evidenced by written deeds of partnership, which show that they were all partnerships at will. There was no reference also to the sharing of the goodwill as such, except that the sharing of the profit and loss is mentioned in general. The deeds also did not contain any clause as to the continuance of the partnership in case of the death or retirement of any partner, by the remaining partners. The business was carried on by the partnership in purchase and sale of yarn and cloth. To be more accurate, four of the partnerships exclusively dealt with the purchase and sale of yarn, one in purchase and sale of cloth alone and another in the purchase and sale of cloth and yarn. Each of the firms had a distinctive name. As already stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Controller held that, having regard to the fact that the firm had been in existence for quite some time and was carrying on a large business, it cannot be said that the said business did not carry any goodwill. Having arrived at the conclusion that the business had goodwill, he expressed the view that it had to be evaluated as any subsequent event or conduct of the dissolution or reconstitution would not affect the passing itself. Before the Tribunal it was contended that the firms had no goodwill at all and that even if they had goodwill, on the death of Ramaswami Chettiar, there was dissolution of the firms by operation of law and that with the dissolution, the goodwill also disappeared. On the first contention, the Tribunal held that the firms were in existence for quite some years and had established a name in the particular line of business which they were conducting. Each firm had also its own clientele and business contracts and that, therefore, the firms had goodwill. On the second contention, the Tribunal held that the dissolution of the firms subsequent to the death of Ramaswami Chettiar, did not affect the passing of goodwill on the death. Further, if the goodwill ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he firms was purchase and sale of yarn and cloth. According to the learned counsel, the firms were not manufacturers of these yarn and cloth which they were dealing and that they purchased from reputed manufacturers and sold them. The firm as such did not have any brand name or any other particular trade mark under which the yarn and cloth sold by them were given to the public. In these circumstances, according to the learned counsel, the firms could not have derived any goodwill and there could be no goodwill at all. In support of this contention, the learned counsel relied on the decision of this court in Seethalakshmi Ammal v. Controller of Estate Duty. In that case, the manager of a Hindu joint family was carrying on business in yarn under certain quota rights. He had a very lucrative business. On his death, the goodwill of this business was sought to be valued and added to the estate. This court, after considering the decisions which dealt with the meaning of goodwill, held that the deceased had no goodwill in the business carried on by him. The learned judges pointed out that the deceased was not a manufacturer of yarn, that he was selling only manufactured yarn supplied by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f competition and many other factors go individually or together to make up the goodwill, though locality always plays a considerable part. Shift the locality, and the goodwill may be lost. At the same time, locality is not everything. The power to attract custom depends on one or more of the other factors as well. In the case of a theatre or restaurant what is catered, how the service is run and what the competition is, contribute also to the goodwill." The Supreme Court again in Khushal Khemgar Shah v. Khorshed Banu referred to goodwill of a business as : "........an intangible asset being the whole advantage of the reputation and connections formed with the customers together with the circumstances which make 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 because of its reputation, location, and other features." These decisions show that the existence of a goodwill depends on a number of considerations and that merely because a person is dealing in a particular type of goods it could not be stated that there could be no goodwill at all in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een the partners, be included in the assets, and it may be sold either separately or along with other property of the firm." In the instant case, there was no contract relating to the goodwill as such. Therefore, each will be entitled to a share in the goodwill in the proportion in which they would be entitled to profit and loss. Section 55 also provides that if the goodwill is sold after dissolution, a partner may carry on a business competing with that of the buyer, but he cannot use the firm name nor represent himself as carrying on the business of the firm or solicit the custom of persons who were dealing with the firm before its dissolution. We have already noticed that, after the dissolution, the surviving partners reconstituted the firms and carried on the same business in the same place and under the same name and style, except in two cases, where the name of the firm was changed. These clearly show that, though the reconstituted firms did not purchase the goodwill as such, they were permitted to use the goodwill without the goodwill being valued and shared among the partners in the dissolution. The right to use the partnership name is considered to be one of the most im ..... X X X X Extracts X X X X X X X X Extracts X X X X
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