FAKHRUDDIN H. SHAIKH, J.--This is a reference by applicant Muhammad Umer Farooqui under section 59 (3) of the Estate Duty Act,1950 (hereinafter referred to as the Act), whereby following question has been- referred for decision to this Court: "Whether on the facts and in the circumstances of the case, the Income tax Appellate Tribunal was justified in including Rs. 48,300 in regard to the goodwill of the firm- of Messrs Ayoob Brothers, in the Estate left by Late Dewan Mushtaq Ahmad: "
2. Applicant Muhammad Umer Farooqui is eldest son of late Dewan Mushtaq Ahmad, who died on 12th March, 1968. The deceased bad joined the firm of Messrs. Ayoob Brothers on 24-4-1967 and continued as a partner until his death i. e. I2-3-1968. On the death of the deceased the said firm was dissolved and a new firm under the name and style of Messrs Mustafa Ayoob Brothers came into existence and commenced business with effect from 26th day of March, 1968. Thus, the firm Messrs Ayoob Brothers carried on business only for 10 months i.e. From 24th April, 1967 to 12th March, 1968. According to the partnership-deed of the dissolved firm, the deceased Dewan Mushtaq Ahmed had 20 paisa share in the partnership business.
3. The Assistant Controller of Estate Duty, while computing the value of the assets of the dissolved firm, estimated the value of its, goodwill as Rs. 2,41,500 and 20 % share of deceased Mushtaq Ahmed was estimated as Rs. 48,300 according to the statement of facts given by the applicant, but the figures are not correct. The assessment order shows that the income of the dissolved firm for the year 1968-69 (year ending 31st December, 1967) was Rs. 2,10,297 while income for the year 1969-70 (year ending 31st December, 1930) was taken as Rs. 2,72,705. The learned Assistant Controller of Estate Duty ignored the figures for the year 1969-70 on the ground that the same related to the post death period of Dewan Mushtaq Ahmed, the deceased. He, therefore, took into consideration the income of 1968-69 only i. e. Rs. 2,10,297, out of which 20% share of the deceased came to Rs. 42,000 and this amount -was included in the assets of the deceased for the purpose of computing Estate Duty under the said Act, Aggrieved by the above assessment order of the learned Assistant Controller of Estate Duty, the applicant filed appeal before the income-tax Appellate Tribunal. The learned Tribunal dismissed the appeal vide order, dated 20th August,1971 and upheld the order of the Assistant Controller of Estate Duty regarding determination of the value of goodwill. Aggrieved by the said order, the applicant has referred the question quoted above for decision to this Court.
4. Mr. Lqbal Naeem Pasha the learned counsel for the applicant has contended that firm of Messrs Ayoob Brothers, of which deceased Dewan Mushtaq Ahmed was a partner, bad carried on business for 10 months only and as such there could be no goodwill of such firm. According to him, the value of the goodwill should not have been included in the assets of the deceased because the firm had no goodwill at all. It is not denied that goodwill is seemed to be part of the assets. According to Rules 23 of thel Estate Duty Rules of 1950, the term 'assets' include goodwill. Hence the question that now falls for determination is whether the Assistant Controller I of Estate Duty was justified in adding the value of goodwill at Rs. 42,0001 the asset of the deceased for the purpose of computing of Estate Duty. The term 'goodwill' has not been defined in the Estate Duty Act or the Rules or even by the Partnership Act, 1932. It will, therefore, be necessary to refer) to the Ordinance dictionary meaning of the term 'goodwill' in order to decide the question under reference. According to Stroud's Judicial Dictionary, the) term 'goodwill' has been taken:- "as the probability that the old customers will resort to the old place. But generally speaking, it means much more than that. Often it happens that the goodwill is the very sap and life of the business, without which the business would yield little or no fruit . . . . . . .
The goodwill of a business means every affirmative advantage-as contrasted with negative advantage--that his been acquired in carrying on the business, whether connected with the premises of the business, or its name or style, and everything connected with or carrying with it the benefit of the business.
Tito goodwill of a business is a composite thing referable in part to its locality, in part to the way in which it is conducted and the personality of those who conduct it, and in part to the likelihood of competition, many customers being no doubt actuated by mixed motives in confer--ring their Customs . . . . . The name of a FIRM is a very important part of the goodwill."
In support of the above meaning the author has referred to the cases of Pearson v. Pearson, 27 Ch. D 145 ; Trego v. Hunt(1896) A C 7 ; Inland Revenue v. Muller 1901 A C 225 ; Churton v. Douglas28 L J Ch. 845 and Federal Commissioner of Taxation v. William--son 67 C L R 561.
5. The learned Tribunal has also relied on the case of Habib and others v. Haji Muhammad and others P L I) 1963 Kar. 1050 in which Qadeeruddin Ahmed, J. (as he then was) while discussing the meaning of term 'goodwill' observed as under with reference to the case of Churton v. Douglas referred to above:-- "25. The meaning of goodwill may, therefore, be understood to be in the words of Vice-Chancellor Wood Churtort v. Douglas 'every advant--age every positive advantage, if I may so express it, as contrasted with the negative advantage of the late partner not carrying on the business himself -- that has been acquired by the old firm in carrying on its business, whether connected with the premises in which the business was previously carried on, or with the name of the late firm, or with arty other matter carrying with it the benefit of the business, with the reservation that the werds 'any other matter' should not be taken to convey the idea that the seller of a goodwill undertakes not to do the same business with his old customers, unless he has agreed to do so."
It would, therefore. Be clear that the term 'goodwill' although not defined by the relevant law, has been dealt with in several decisions of the Court includ--ing our Court. It is, therefore, to be understood in its ordinary dictionary meaning and as elucidated in the various decisions.
6. The said Act and the Rules made thereunder neither define the term 'goodwill' nor prescribe be the method of determining the value of the 'goodwill' Hence the Assistant Controller of Estate Duty had no other alternative but to fall back on the Income-tax return filed by the Company and base the value of the goodwill thereupon.The learned Assistant Controller of Estate Duty has taken into account only that income of the dissolved firm which was earned during the lifetime of deceased Dewan Mushtaq Ahmed. He, there fore, computed the value of the goodwill on the basis of that income and determined the share of the deceased accordingly: We do not find any fault with the procedure adopted by the Assistant Controller of Estate Duty which was approved by the learned Tribunal by its order, dated 28-8-1971. The Tribunal h s rightly observed that the goodwill of a business does not necessarily depend upon the period for which a firm has been in existence, but it is created by various factors including expertise of the management location of the business and various other facilities available to it. It has been further observed by the Tribunal that long continuity may be one of the factors but that is not the only decisive factor for determining the value of the goodwill. We do not see any reason to take exception to this view.
7. We are, however, doubtful if the question referred to us is at all a question of law. Once it is accepted that goodwill is part of the assets then the question of determination of the value of goodwill shall bf 3 matter of investigation by the Controller of Estate Duty. As no particular method has been prescribed for determining the value of the goodwill, hence it has been left to the discretion of the Controller to determine the same, keeping in view' the various factors, reference to which has been made by the learned Tribunal as stated above. There is no plea in the reference application that the Assistant Controller of Estate Duty spa the Tribunal had acted arbitrarily or speculatively or whimsically in determining the value of the goodwill of the dissolved firm. In fact the learned counsel for the applicant himself contended that the usual mode of determining the 'goodwill' of a firm is to take three years income of the firms and divide it by three which is equal to one year income of the firm in average.
We therefore, do not see any reason to differ with the Tribunal on the question referred to above.
Consequently the question is answered in the affirmative but there will be no order as to costs: