REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.8247 OF 2004

Controller of Estate Duty, Kerala          ...Appellant(s)

Versus

Nalini V. Saraf                    ...Respondent(s)

With Civil Appeal No.1700 of 2006, Civil Appeal No.5812 of  2005, S.L.P. (C) No.16981/2006, S.L.P. (C) No.16985/2006  and S.L.P. (C) No.9233 of 2006

J U D G M E N T

S.H. KAPADIA,J.

Civil Appeal No.8247 of 2004:

Heard learned counsel on both sides.

This civil appeal is filed by the Controller of  

Estate Duty, Kerala, against the decision dated 18th July,  

2003, delivered by the Kerala High Court in Tax Reference  

No.62 of 1998.

One V.G. Saraf passed away on 18th October, 1984.  

He  was  a  partner  in  M/s.  Saraf  Trading  Corporation,  a  

partnership Firm carrying on business as commission agents  

and as exporters of Tea.  The Firm was constituted under  

Deed of Partnership dated 27th November, 1963.  The Firm  

had  three  partners.   The  deceased  had  fifty  per  cent  

shares in  profit and  loss.   On 16th September, 1981, the

...2/-

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Firm  was re-constituted  with the  admission of  one more  

partner and a minor.  The Assistant Controller of Estate  

Duty, inter alia, held that, for determining the value of  

goodwill,  there  were  two  methods  of  valuation,  namely,  

super-profit method and total capitalization method.  The  

Assistant  Controller  preferred  the  super-profit  method.  

It may be noted that, in this case, the method is not in  

dispute.  What is in dispute is the application of the  

super-profit  method  to  the  facts  of  the  present  case.  

Applying the super-profit method, the Assistant Controller  

applied the multiplier of three years' purchase whereas  

the assessee-respondent contended that 3X was excessive.  

The  Assistant  Controller  further  held  that  refund  of  

income tax,  which became  due after  the  demise  of V.G.  

Saraf, constituted property of the Deed, which was also  

disputed by the legal representatives of the deceased.

We are concerned, therefore, with the valuation of  

the goodwill and the refund of income tax in this appeal.

The partnership Firm, as stated above, was engaged  

in the business of exporting Tea.  It exported Tea to  

U.S.S.R.  On facts, the Income Tax Appellate Tribunal [for  

short, “the Tribunal”] found that, at the relevant time,  

the market conditions in U.S.S.R. were not congenial; that  

there was huge volatility  in the Tea export business;  

that  export of  Tea had  huge volatility  even otherwise;  

and,  in  the  circumstances,  the  Tribunal  applied  the  

multiplier of one year's purchase instead of three years'  

purchase.  This finding was rightly upheld by the High  

Court.   In  any  event,  there  is  no  hard  and  fast  rule  

regarding  multiplier  to be  applied for  evaluating  the

...3/-

- 3 -  

goodwill of the Firm.  It all depends on the nature of the  

business and the prevailing market conditions.  Hence, we  

are of the view that this aspect is a pure question of  

fact and does not call for interference by this Court.  In  

this connection, one more point needs to be highlighted.  

In  order to  determine the  super profits,  the Assistant  

Controller and the Appellate Authority took the average  

income  at  Rs.76,79,673/-  and  deducted  therefrom  

Rs.4,61,784/-  as  Interest  on  average  capital  employed  

fixed at twelve per cent on the basis of Bank rates as  

they existed at the relevant time.  However, the Tribunal  

and the High Court came to the conclusion that the rate of  

twelve  per  cent  was  on  the  lower  side  as  there  is  a  

difference between rate of Interest and rate of Return on  

the capital employed.

On the question as to whether refunds in question  

which became payable after the death, the Tribunal and the  

High Court concurrently held that refunds had not become  

due (crystallized) on 18th October, 1984, when V.G. Saraf  

passed away.  In fact, on that day, the claim for refund  

under the Act was pending adjudication.  Such refund stood  

determined only after the demise of the deceased.  Hence,  

such  refund  cannot  be  considered  to  be  a  property  

available at the time of the death. [See  Estate of Late  

General Sir Shankar S.S.J.B. Rana vs. Controller of Estate  

Duty [1990] (186 I.T.R.578)].

For the afore-stated reasons, we see no reason to  

interfere  with  the  impugned  order  of  the  High  Court,  

hence,  this  appeal   filed  by   the  Department  stands  

...4/-

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dismissed with no order as to costs.

Civil  Appeal  No.1700  of  2006,  Civil  Appeal  No.5812  of  2005, S.L.P. (C) No.16981/2006, S.L.P. (C) No.16985/2006  and S.L.P. (C) No.9233 of 2006:

Delay condoned.

In view of the order passed in Civil Appeal No.8247  

of  2004, these  appeals and  special leave  petitions are  

dismissed.

......................J.            [S.H. KAPADIA]

......................J.            [H.L. DATTU]

New Delhi, November 25, 2009.