Estate duty on adjustment-entry transfers and business goodwill depends on possession, exclusion of donor, and the facts of the trade.

Amounts transferred by adjustment entries in a deceased partner's accounts were held outside estate duty where the relevant version of section 9 applied only to gifts made within one year of death, and section 10 was not attracted because the donees had assumed bona fide possession and enjoyment without the donor retaining the required benefit. A retail textile business was also held not to have assessable goodwill on the facts, since goodwill depends on the nature and circumstances of the particular trade and cannot be assumed merely from longevity, profitability, or location. The reference was answered against the revenue on both issues.

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Issues: (i) Whether amounts transferred by adjustment entries in the deceased's partnership accounts were liable to estate duty under sections 9 and 10 of the Estate Duty Act, 1953. (ii) Whether the retail textile business of the firm had any goodwill assessable to estate duty.

Issue (i): Whether amounts transferred by adjustment entries in the deceased's partnership accounts were liable to estate duty under sections 9 and 10 of the Estate Duty Act, 1953.

Analysis: The relevant version of section 9 applied with the words "one year", so gifts made more than one year before death fell outside that provision. As to section 10, the controlling principle was whether the donees had immediately assumed bona fide possession and enjoyment and retained it to the entire exclusion of the donor. The transfers were by adjustment entries, and the Supreme Court authorities relied upon established that such transfers did not attract section 10 merely because the donor remained a partner or because the money continued in the firm.

Conclusion: The amounts of Rs. 28,000 were not liable to be included in the estate; the finding was in favour of the accountable person.

Issue (ii): Whether the retail textile business of the firm had any goodwill assessable to estate duty.

Analysis: Goodwill depends on the nature and circumstances of the particular business. A retail trade in textiles, open to customers as in any similar shop, without a trade mark, special manufacture, or other distinctive feature, does not necessarily possess goodwill merely because the business is longstanding, profitable, or locally situated.

Conclusion: The Tribunal was justified in holding that no goodwill existed and the addition on that account was not sustainable; the finding was in favour of the accountable person.

Final Conclusion: The reference was answered against the revenue on both questions, and the accountable person succeeded with costs.

Ratio Decidendi: For estate duty, adjustment-entry gifts are not includible under section 10 unless the donor retains a benefit or fails to be excluded from possession and enjoyment, and goodwill must be found on the specific facts of the business rather than assumed as a matter of course.

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