Full Judgment
2. The deceased Shri Tirath Ram Hand, who died on 14-8-1981, was a partner in a firm called Jaycee Machinery Mart. In computing the estate liable to estate duty, the deceased's share in the goodwill of the firm of Jaycee Machinery Mart was not taken into account but the Assistant Controller on the other hand was of the opinion that there was goodwill attached to that firm and computed it at Rs. 49,448 and included in the principal value of the estate of the deceased.
3. On appeal the Appellate Controller held that Clause 3 of the partnership deed dated 13-4-1977 of the firm of Jaycee Machinery Mart provided that in the case of death of a partner, the partnership would stand dissolved and the legal heir of the deceased would have no claim on the goodwill of the said business and, therefore, it could not be said that any goodwill belonged to the assessee and that it passed on the death of the deceased. He directed the deletion of the addition of Rs. 49,448.
4. Filing an appeal against this order of the Appellate Controller, the department contended before us that as per recent decision of the Supreme Court in CED v. Mrudula Nareshchandra [1986] 160 ITR 342 goodwill is an asset passing on the death of a partner notwithstanding a clause to the contrary in the partnership deed.
5. Though the learned representative for the accountable person made an attempt to distinguish this decision, the legal position in regard to the passing of goodwill on the death of a partner in a firm having thus been enunciated by the Supreme Court, it is no more open to urge that goodwill does not pass on the death of a partner all because there was a stipulation in the partnership deed to the contrary. We, therefore, hold that the share of the goodwill of the deceased in the abovesaid firm passed on his death and its value was includible in the principal value of the estate. The quantum of the share of goodwill not having been disputed before us, we do not wish to express any opinion thereon.