JUDGMENT
G.S. Singhvi, J.
1. On an application filed by the petitioner (hereinafter described as the accountable person), the Income-tax Appellate Tribunal, Amritsar Bench, Amritsar (for short, “the Tribunal”), referred the following question of law for the opinion of this court under Section 64(1) of the Estate Duty Act, 1953 (for short, “the Act”) :
“Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the firm, M/s. Khanna and Hari Raj, had a goodwill which passed on the death of Shri Shivraj Singh ?”
2. For the purpose of deciding the aforementioned question, we may notice the relevant facts.
3. M/s. Khanna and Hari Raj of which the late Shri Shiv Raj Singh (predecessor-in-interest of the accountable person) was a partner, was carrying on business as selling agent of vegetable products of M/s. I. V. P. Ltd. For this purpose, it had entered into an agreement with M/s. I. V. P. Ltd. some time in November, 1972. The same was renewed from time to time. The last renewal was made on September 24, 1980, was to last till October 31, 1987. The same was to remain effective up to October 31, 1987. Shri Shiv Raj Singh died on April 30, 1980, i.e., during the currency of the agreement. By an order dated August 20, 1981, the Assistant Controller of Estate Duty, Jalandhar (hereinafter described as “the A. C. E. D.”), assessed the estate of the late Shri Shiv Raj Singh at Rs. 9,12,964 by including the value of his share in the goodwill of M/s. Khanna and Hari Raj. The appeal filed by the accountable person under Section 62(5) of the Act was partly allowed by the Appellate Controller of Estate Duty, Jalandhar (hereinafter described as “the Appellate Controller”). He upheld the decision of the A. C. E. D. that the firm, M/s. Khanna and Hari Raj, had a goodwill and the late Shri Shiv Raj Singh had the share in the same. He further held that the share of Shri Shiv Raj Singh in the goodwill of the firm could be legitimately counted for the purpose of estate duty. He, however, reduced the value of the share of the deceased in the goodwill from Rs. 3,36,155 to Rs. 1,10,000. The accountable person and the A. C. E. D. filed separate appeals against the order of the Appellate Controller, which were disposed of by the Tribunal by a common order dated October 23, 1986. The accountable person applied for rectification of the so-called error in the order of the Tribunal. His application was rejected by it vide order dated January 12, 1988.
4. Shri S.C. Nagpal argued that the findings recorded by the Tribunal on the issue of goodwill of the firm are self-contradictory and are based on misreading of evidence produced by the parties and, therefore, the question framed by the Tribunal may be answered in favour of the accountable person. He referred to paragraphs 7 and 14 of the order dated October 23, 1986, and para. 4 of the order dated January 12, 1988, to show that the Tribunal was never certain about the goodwill of the firm–M/s. Khanna and Hari Raj and, therefore, there was no occasion for it to uphold the finding recorded by the Appellate Controller.
5. Dr. N.L. Shardha, counsel for the respondent, argued that even though the orders passed by the Tribunal are not happily drafted, the finding of fact recorded by the A. C. E. D. and the Appellate Controller on the issue of goodwill of the firm–M/s. Khanna and Hari Raj, and the share of the late Shri Shiv Raj Singh in the value of the goodwill does not give rise to any question of law which may require determination under Section 64(1) of the Act. He referred to paragraph 5 of the order dated October 23, 1986, and submitted that after having affirmed the findings recorded by the Appellate Controller that M/s. Khanna and Hari Raj had the goodwill, there was no occasion for the Tribunal to make observations in paragraphs 7 and 14 of the said order suggesting that counsel for the accountable person had not challenged the finding on the issue of goodwill of the firm or to make an observation in para. 4 of the order dated January 12, 1988, that existence of goodwill is prima facie established.
6. We have thoughtfully considered the respective submissions. In CED v. Smt. Pushpa Anand [1999] 235 ITR 534, this court considered a similar question referred by the Tribunal. After making a reference to the decisions reported as IRC v. Muller and Co.’s Margarine Ltd, [1901] AC 217 (HL) ; Rustom Cavasjee Cooper v. Union of India [1970] 40 Comp Cas 325 (SC); CIT v. B.C. Srinivasa Setty [1981] 128 ITR 294 (SC); State v. Prem Nath [1977] 106 ITR 446 (P & H) [FB]; CED v. Mrudula Nareshchandra [1986] 160 ITR 342 (SC); S. C. Cambatta and Co. Pvt. Ltd. v. CEPT [1961] 41 ITR 500 (SC); Smt. Vindoor Bai v. CED [1981] 132 ITR 421 (All); CED v. Kanta Devi Taneja [1981] 132 ITR 437 (Gauhati); Mahabir Prasad Poddar v. CED [1976] 104 ITR 612 (Patna); Smt Kamlawati Raizada v. CED [1976] 105 ITR 703 (All) and K.A. Subramaniam v. CED [1962] 46 ITR (E.D.) 1 (Mad), the court culled out the following principles (page 542) :
“(i) The goodwill of a business is an intangible asset. It is the advantage or reputation and location found with the customer. 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.
(ii) The goodwill is comprised of a variety of elements. The location, the service, the standing of the business, the honesty of those who run it are some of the factors which contribute to the goodwill of the business,
(iii) The goodwill is acquired during the course of a number of years of business. It is founded on the belief and faith of the customer. It rarely springs from the very inception of the firm.
(iv) Under the Estate Duty Act each and every right which passes on death has to be valued on the assumption that there is a willing purchaser for the right or property.
(v) The interest of a partner in a partnership firm is property within the meaning of Section 2(15) of the Act. Such interest extends to a share in all partnership assets including goodwill.
(vi) On death of a partner his interest in the entire unit of the firm including goodwill passes and the value of the goodwill has to be added to the principal value of the estate for the purpose of the Act of 1953.”
7. In the light of the above, we may now examine whether the finding recorded by the Tribunal that firm M/s. Khanna and Hari Raj, had goodwill and the share of the late Shri Shiv Raj Singh was countable for the purpose of assessing his estate under the Act. A careful reading of the order dated October 23, 1986, shows that after making a reference to the basic facts, the Tribunal approved the reasons assigned by the Appellate Controller for confirming the finding recorded by the A. C. E. D. that M/s. Khanna and Hari Raj was having goodwill and then proceeded to examine the ancillary issue relating to the value of Shiv Raj Singh’s share in the goodwill. In his order, the Appellate Controller noted that M/s. Khanna and Hari Raj of which the late Shri Shiv Raj Singh was a partner had been working as a selling agent of the vegetable products of M/s. I. V. P. Ltd., since 1972 and the agreement entered into between the two was being renewed from time to time. He noted that as per clauses 11 and 12 of the agreement which was in force at the time of demise of Shiv Raj Singh, the agreement could be terminated before the expiry of five years, but, in fact, it was never terminated. He further noted that the agency given to the firm–M/s. Khanna and Hari Raj, was not transferable without the consent of M/s. I. V. P. Ltd., and, ultimately, the agency was terminated in 1983 because M/s. I. V. P. Ltd., had discontinued manufacturing of vegetable products.
8. In our opinion, the finding recorded by the Appellate Controller on the issue of goodwill of the firm–M/s. Khanna and Hari Raj, cannot be termed as perverse and the mere fact that the Tribunal made some casual observations in its order dated October 23, 1986, about the concession allegedly made by counsel for the accountable person and, later on, diluted the same by observing that there is no positive material to justify the said observation does not call for interference by this court.
9. Hence, the question referred by the Tribunal is answered in favour of the Department and against the accountable person.