( 1 ) AT the instance of the Controller of Estate Duty, the Income Tax Appellate Tribunal, Ahmedabad Bench A the statement of the case has been submitted and following question of law have been referred to this court for its opinion in connection with the estate duty proceedings arising on account of death of Manhargauri Rasiklal Shah who expired on 6. 10. 76. "1. Whether on the facts and in the circumstances of the case, and in law the Tribunal was right in holding that as there was a clause in the partnership deed of the firm M/s. Hiralal Bhikhabhai and Co. , stating that partners would not be having any share in the goodwill of the firm, on the death of deceased the goodwill was not liable to be included in the principal value of estate? 2. Whether on the facts and in the circumstances of the case, and in law the Tribunal was right in holding that since the deceased had retired from the firm (though within two years) the goodwill would not be chargeable u/s. 9 of the Estate Duty Act, 1953?"

( 2 ) THE deceased was a partner in the firm of Hiralal Bhikhabhai and Co. Under clause 16 of the deed of partnership dated 18. 9. 76, the good will of the business were to belong to the partnership firm and not to individual partners and the deceased heirs of the deceased partners has no right in the good will. Clause 5 of the said partnership deed further envisaged that on the retirement of a partner, the firm shall not cease to exist but shall carry on business with the remaining partners or with others who may be admitted to the partnership by them. The deceased had retired from the firm which was necessitated because of prolonged sickness and physical disability. However, retirement was within two years of her death. Two fold contentions were raised. Firstly because of the clause in partnership deed deceased has no share in good will at all. Secondly, that she had retired from the firm. As on the date of death she was not a partner in the firm hence as on date of death she had no interest in the good will which could pass on her death to legal heirs.

( 3 ) THE Asst. Controller negated the contention of the firm by holding that as the deceased retired within two years of his death the same shall be chargeable. Reference to retirement within two years suggests that the ACED was perhaps acting under Section 9 of the Act. He therefore included the share in the value of the good will of the said firm in the total value of the estate of the deceased chargeable to the Estate Duty.

( 4 ) THE Controller of Estate Duty following the decision of this Court in Mrudula Nareshcandra v. CED 100 ITR 297 and of the Bombay High Court in Smt. Urmila v. CED 122 ITR 958 held that inclusion of good will as made by the Asst. Controller was not justified. The Tribunal on appeal by the revenue upheld the order of the Controller of Estate Duty.

( 5 ) AT the outset we may notice that the decision in Mrudula Nareshchandras case was concerned with passing off the interest of the deceased in the assets of the firm of which she was partner at the time of her death in the light of the similar clause as in the present case in the partnership deed. It was not a case where the deceased had ceased to be a partner in the firm much before the date of death, and she had as such no interest in the firm at the time of her death which will pass to heirs. Obviously, once a partner retires from the firm he ceases to be a partner. Thereafter at the time of death since he cannot be considered to be a partner in the firm the question of he having a disposable interest in the good will of the firm as such on the date of death does not arise. In that event, it may only be a case of computation of outstanding account of the deceased in the firm of which he was partner, if the same has not been settled by him or her as the case may be. If the accounts of partnership interest in the case of retiring partner has been settled the question of determining the interest in the p