Estate duty valuation of goodwill and deemed gifts turns on open market value at death, not date of gift

A partnership firm's goodwill may be included in estate duty valuation even where the partnership deed excludes heirs from a contractual share, because the exclusion does not negate the existence or value of goodwill; substantial super profits supported a conservative valuation at one year's average super profits. For jewellery gifted within two years before death, property deemed to pass on death under the Estate Duty Act, 1953 is valued at its open market value on the date of death, not the date of gift, by application of the statutory valuation rule. The accountable person's challenge failed on goodwill, while the revenue's position succeeded on the jewellery valuation.

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Issues: (i) Whether the deceased's share of goodwill in the partnership firm could be included in the estate duty valuation and whether the estimate of goodwill adopted was excessive; (ii) Whether jewellery gifted within two years before death was to be valued as on the date of gift or as on the date of death for purposes of estate duty.

Issue (i): Whether the deceased's share of goodwill in the partnership firm could be included in the estate duty valuation and whether the estimate of goodwill adopted was excessive

Analysis: The partnership clause excluding the heirs from a share in goodwill did not establish that the firm had no goodwill or that such goodwill had no value. The existence of substantial super profits indicated goodwill, and the business being that of a contractor did not preclude goodwill. On the facts, valuation at one year's average super profits was treated as conservative and not shown to be excessive. The earlier decision concerning the same firm and the authorities relied upon supported inclusion of goodwill in the estate.

Conclusion: The inclusion of the deceased's share of goodwill was upheld and the valuation was not found excessive, against the accountable person.

Issue (ii): Whether jewellery gifted within two years before death was to be valued as on the date of gift or as on the date of death for purposes of estate duty

Analysis: Section 9 of the Estate Duty Act, 1953 deems certain gifts made within the prescribed period before death to pass on death, and Section 36(1) of the Estate Duty Act, 1953 requires valuation at the price the property would fetch in the open market at the time of death. The relevant date for valuation was therefore the date of death, not the date of gift. The cases dealing with accrued interest or different factual situations did not alter that conclusion, and the revenue's stand was supported by the statutory scheme and the cited authorities.

Conclusion: The gifted jewellery had to be valued as on the date of death, and the revenue's appeal on this point succeeded.

Final Conclusion: The accountable person's challenge failed, while the revenue obtained relief on the valuation of the gifted jewellery, leaving the order partly in favour of the revenue.

Ratio Decidendi: Property gifted within the statutory look-back period and deemed to pass on death under the Estate Duty Act, 1953 must be valued by reference to its open market value at the date of death, and a partnership firm's goodwill may be brought to estate duty even if the deed denies heirs a contractual share in it.

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