The valuation of a deceased partner's share in a partnership, including goodwill, for the purpose of determining estate duty, should be made in accordance with the provisions of the partnership deed, but the surviving partners are liable for payment of duty in respect of the benefit accruing to them due to the death of the deceased, which is the market value of the goodwill less the value thereof as mentioned in the partnership deed.

( 1 ) IN this reference under Section 64 (1) of the E. D. Act, 1953, arising out of the estate duty proceedings consequent on the death of one George Galstaun Apcar, deceased, we are concerned with the question regarding valuation of the goodwill of a partnership in which the deceased, during his lifetime, was a partner.

( 2 ) FOR better appreciation of the question referred to the court for its opinion, it is necessary to set out some of the relevant facts. They are: The deceased, John Galstaun Apcar (hereinafter referred to as "the deceased "), along with Mr. John S. Gregory and Mr. Sukumar Dey (hereinafter referred to as " the accountable persons ") were partners in a firm, M/s. Talbot and Co. , Calcutta, constituted by a deed of partnership dated December 14, 1962. The terms of the said deed of partnership relevant for our purpose may be stated. They are :" 17. As soon as possible after the 31st day of December in every year during the continuance of the partnership a general account shall be made up to such date of the credits, property, effects, debts and liabilities of the partnership and of all transactions matters and things usually comprehended in a general account of the like nature. Every such account shall be balanced agreed to and signed by all the partners and when so signed shall be binding on all the partners except that if any manifest error therein be detected and pointed out by any partner to the others and other of them within six months after such signature thereof such error shall be forthwith rectified. Immediately after the signing and settling of every such annual general account each partner shall be entitled to draw out and receive his share of the net profits of the business for the past year on bringing into account all monthly sums previously drawn out by him under the provisions in that behalf herein before contained. 18. If any partner shall die during the continuance of the partnership the surviving partner or partners shall as from the date of such death and if more than one in the proportions in which they were at such date entitled to share in the net profits of partnership succeed to the share of the deceased partner in the partnership business and the property and goodwill thereof and shall undertake all the debts, liabilities and obligations of the partnership and pay the representatives of the deceased partner as price of such share ; (a) His share in the capital and property of the partnership as ascertained by the last annual account taken prior to his death, and (b) His share of undrawn current profits up to the date of his death. 19. For the purpose of ascertaining the amount payable to the representatives of a deceased partner of his share in the goodwill of the business the value of such goodwill shall be deemed to be Rs. 1,00,000 which sum shall be added to the sum payable as aforesaid in respect of the deceased partner's share in the capital and property of the partnership. "

( 3 ) THE deceased executed a will on April 19, 1961, appointing his wife, Mrs. S. Mary Apcar, as the sole executrix. After the death of the deceased on April 17, 1965, the widow submitted an account showing the net value of the estate of the deceased at Rs. 1,50,616, including the share of the deceased in the said firm. The value of the business goodwill of the firm was stated to be Rs. 1,00,000. The Asst. CED did not accept this value of the goodwill and fixed the same at Rs. 5,00,000 and determined the proportionate value of the share accordingly. The total value of the estate was, therefore, determined at Rs. 3,28,745 and the assessment was made on it. Subsequently by an order dated May 8, 1967, passed under Section 61 of the E. D. Act, 1953 (hereinafter referred to as " the Act "), the Asst. CED revised the principal value and the accountable persons mentioned above were treated to be the accountable persons. Against this order dated May 8, 1967, the accountable persons preferred an ap