Estate duty valuation of a deceased partner's share must be done as a whole, not by separately revaluing firm assets.

For estate duty valuation of a deceased partner's interest, the share must be treated as an indivisible asset and valued as a whole under the open-market standard. The balance-sheet value is a relevant and important factor, especially where the partnership deed provides for payment on that basis, but the revenue cannot revalue one firm asset separately and add its enhanced market value to the already accepted share value. A transferee's restricted rights under partnership law also prevent a breakup valuation of individual assets. The valuation adopted by the department was therefore not in accordance with law, and the issue was decided for the assessee.

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Issues: Whether, for estate duty purposes, the deceased partner's interest in the firm could be valued by taking the balance-sheet value of the partnership share and then adding the enhanced market value of one asset of the firm, namely the jute press.

Analysis: The principal value of the property had to be estimated under section 36 of the Estate Duty Act, 1953 read with rule 7(c) of the Estate Duty Rules, 1953, and the share of a partner was an indivisible asset. The balance-sheet value of the deceased's share was a relevant and important piece of evidence, especially where the partnership deed itself contemplated payment of the outgoing partner's share on that basis. A transferee of a partner's interest has restricted rights under section 29 of the Indian Partnership Act, so the market value of the partnership share could not properly be fixed by breaking up and separately revaluing individual assets of the firm. The authorities were entitled either to accept the balance-sheet value or to determine the value of the entire share on open market principles, but not to add the enhanced value of a particular asset to the already accepted share value.

Conclusion: The valuation adopted by the department was not in accordance with law and the issue was answered in favour of the assessee.

Ratio Decidendi: For valuing a deceased partner's share in a firm for estate duty, the share must be valued as a whole under the open-market standard, with the balance-sheet value and the partnership deed being relevant factors, and the revenue cannot enhance that value by separately revaluing and adding a single firm asset.

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