JUDGMENT

SABYASACHI MUKHARJI, J. :— This is an appeal by certificate granted by the High Court of Gujarat by its order dated 2nd May, 1974 from the judgment and order dated 28th June, 1973 in Estate Duty Reference No. 3 of 1970 under section 65(1) of the Estate Duty Act, 1953 (hereinafter called the Act).

2. One Nareshchandra Kantilal died on 13th September, 1962. He was a partner in the firm of Messrs. G. Bhagwati Prasad & Co. having 28 share in the partnership. The partnership was by the document of partnership which is dated 6th June, 1957. On the death of the deceased, the accountable ,person filed necessary return under the Act. The Assistant Controller of Estate Duty while valuing the estate of the deceased, came to, the conclusion that the share of the deceased in the goodwill of the firm in which he was a partner was liable to be included in the principal value of his property. This inclusion was resisted by the accountable person on the ground that the question of adding the value of the share of the deceased in the goodwill of the firm did not arise in view of clause (10) of the partnership deed. Clause (10) was as follows:

"The firm shall not stand dissolved on death of any of the partners and the partner dying shall have no right whatever in the goodwill of the firm".

3. The accountable person contended on the basis of this clause that on the death of the deceased, his heirs had no right in the goodwill of the firm, and as such the value of the said goodwill did not pass under the provisions of the Act and was, therefore, not liable to any estate duty. The Assistant Controller, however, negatived the said contention. He valued the goodwill at Rs. 2,16,900/-. The share of the deceased in the goodwill was worked out from this value at Rs. 60,732/-. The Assistant Controller also worked out the value of the interest which the deceased had in the partnership assets and added to the above referred amount of Rs. 60,732/- as the value of his share in the goodwill.

4. The accountable person, being aggrieved, preferred an appeal before the Appellate Controller of Estate Duty, Bombay. He by and large confirmed the order of the Assistant Controller and made only a slight reduction in the value of the goodwill. The accountable person thereafter went up in appeal before the Appellate Tribunal. She raised before the Tribunal two principal contentions, namely, (1) that the deceased had no interest in the assets of the firm and hence his share in the goodwill did not pass at all, and (2) as, according to the partnership agreement, the partnership was to continue on the death of any of the partners and as it was further stipulated that the deceased would have no interest in the goodwill of the firm on his death, his share in the goodwill did not pass and as such was not liable to the charge of estate duty. The Tribunal rejected both these contentions.

5. It was contended on behalf of the accountable person before the Tribunal that when a partnership was going concern there could not be any separate valuation of the goodwill which went with the running business. The Tribunal noted that there was no question of valuing the goodwill separately because what was to be valued was the totality of interest of a partner in partnership assets including the value of the goodwill. The Tribunal eventually decided the matter relying upon the decision of the Privy Council in Perpetual Executors and Trustees Association of Australia Ltd. v. Commissioner of Taxes, 1954 AC 114. The Tribunal held that in spite of clause (10) of the partnership agreement, the value of the goodwill to the extent of the share of the deceased passed on the death of Nareshchandra Kantilal and it was liable to be charged estate duty.

6. Three questions of law were referred to the High Court. These were:

"1. Whether, on the facts and in the circumstances of the case, the interest of the deceased in the firm of Messrs. G. Bhagwatiprasad & Co. of Ahmedabad was property within the me