1. The only contention is this that the Assistant Controller had erred in holding that the firm of Vimal and Amar Talkies, in which the deceased was a partner, had no goodwill and consequently in deleting the addition of Rs. 13,125 from his estate liable to estate duty.
2. The deceased Lalit Kumar Lunawat was a partner in the firm of Vimal and Amar Talkies with one-sixth share. The firm of Vimal and Amar Talkies was constituted by a deed of partnership dated 14-11-1974. The business of the firm was exhibition of cinema films in two talkies, namely, Vimal and Amar. On his death, the question arose whether the firm of Vimal and Amar Talkies had any goodwill and whether the assessee's share in that goodwill passed on his death which could be included in his estate for the purpose of estate duty.
3. It was contended before the Assistant Controller that the above firm had no goodwill as it did not own any of these cinema buildings. The theatres had been taken on lease from others and the firm only carried on the business of exhibition of films in those theatres. Reliance in this connection was placed on a decision of the Madras High Court in the case of Seethalakshmi Ammal v. CED  61 ITR 317. It was held in this case that where a business involved no indistinguishable features and dealt in standard articles manufactured by someone else, which one could get from anywhere, not merely from a particular dealer, there was hardly any possibility of there being a goodwill attached to such business. It was further contended before the Assistant Controller that on the death of a partner, where the firm is continued after his death, no specific share in the goodwill passed on to his heirs as he did not own any specific share in the goodwill of the firm. It was contended that the goodwill had no value in a going concern of partnership. To support this contention, the assessee relied upon a decision of the Punjab and Haryana High Court in CED v. Shri Ved Parkash Jain  96 ITR 303. The Assistant Controller did not accept either of the above contentions. He was of the opinion that even a business in ordinary goods had goodwill. To support this argument, he referred to the decision of the Allahabad High Court in Smt. Kamlawati Raizada v. CED  105 ITR 703. It was held in this case that in the absence of any material that in the case of the two partnership firms the heirs of the deceased were not entitled to have any share in the assets of the deceased, it must follow that a share in the goodwill of the firms also passed on the death of the deceased. The Assistant Controller also referred to Clause (12) of the partnership deed of the firm dated 14-11-1974 which reads as under : (12). That in case of death or retirement of any partner the share and interest of the deceased partner or the retiring partner in the partnership shall cease and be determined and thereupon legal heirs or such partner shall only be entitled to his/her net credit balance including share profit or loss up to the date of death or retirement, as appearing in the books of account of partnership and shall have no other right or interest whatsoever in the firm or the assets of the firm, including its goodwill.
He was of the view that through the above clause the firm of Vimal and Amar Talkies itself had contemplated the existence of the goodwill as an asset of the firm. He rejected the assessee's contention that in view of the above clause, a deceased partner had no right in the goodwill of the firm following the decision of the Punjab and Haryana High Court in State v. Prern Nath  106 ITR 446 (FB). He then computed the value of the assessee's share in the goodwill in the aforesaid firm at Rs. 13,125 and included it in the estate of the deceased.
4. The accountable person appealed to the Controller (Appeals). It was again submitted before him that the firm of Vimal and Amar Talkies did not have any goodwill as it did not own any of the cinema buildings which had been taken on lease from others. It was submitted that the firm was neither a producer nor a distributor of the films. The Controller (Appeals) agreed with this argument. He was of the view that the customers of this trade remembered only the name of the theatres rather than the person who ran the film exhibition business. According to him, people were attracted to a particular theatre if it had a reputation of exhibiting good films that might give rise to goodwill but then such goodwill went only with the theatre rather than with the person who carried on the business. He thus held that the firm did not have any goodwill and, therefore, the assessee could not have a share therein. He, accordingly, excluded the sum of Rs. 13,125 from the assessment.
5. The department is now in appeal before us. The learned departmental representative submitted before us that the firm of Vimal and Amar Talkies could not be held to have no goodwill. According to him, the firm had goodwill which was also clear from Clause (12) of the partnership deed quoted above. He further submitted that the goodwill passed on the death of the deceased and its value was, therefore, includible in the assessment. To support his submissions, he referred to the following authorities-Rastapur Sharanappa v. CED  77 ITR 800 (Mys.) and Mahabir Prasad Poddar v. CED  104 ITR 612 (Pat.).
6. We have carefully considered the submissions placed before us. In our opinion, the Controller (Appeals) fell in error in holding that there is no goodwill in a cinema business unless the theatres are also owned. We will in this connection refer to an old decision of the Supreme Court in S.C. Cambatta & Co. (P.) Ltd. v. CEPT  41 ITR 500. This was a leading decision on the expression 'goodwill'. It is unfortunate that some of classical Judgmentss of the Supreme Court are also sometimes forgotten. In this case, the question that had arisen was whether the assessce, who was running the Eros Theatre and Restaurant, had any goodwill. We can do no better than quote from this Judgments as under : It will thus be seen that the goodwill of a business depends upon a variety of circumstances or a combination of them. The location, the service, the standing of the business, the honesty of those who run it and the lack of competition and many other factors go individually or together to make up the goodwill, though locality always plays a considerable part. Shift the locality and the goodwill may be lost. At the same time, locality is not everything.
The power to attract custom depends on one or more of the other factors as well. In the case of a theatre or restaurant, what is catered, how the service is run and what the competition is, contribute also to the goodwill.
From the above, it is manifest that the matter of goodwill needs to be considered in a much broader way than what the Tribunal has done....(p. 505) The above observations were made by the Supreme Court on the finding of the Tribunal that the business of the cinema of Eros Theatre and Restaurant had acquired no goodwill and that the only goodwill, which had been acquired, was the lease of the premises. We are of the opinion that the above observations of the Supreme Court fully cover the present case. We have, therefore, to hold that the firm of Vimal and Amar Talkies, which was running the business of exhibition of feature films, had goodwill even though it did not own any of the cinema buildings.
7. Before, however, we proceed, we may also observe that the decision of the Madras High Court in the case of Seethalakshmi (supra), relied upon by the assessee before the Assistant Controller was not followed by the Madras High Conrt itself in the case of CIT v. K. Rathnam Nadar  71 ITR 433. The Court, while dealing with the case of Seethalakshmi (supra) had observed : "In the sense used by this Court in that case it cannot be said that there was any goodwill which this firm had. It was dealing in ordinary automobiles, spare parts and petroleum products. As mentioned in Attorney-General v. Boden  1 KB 539; 1 EDC 566, 585, referred to above, one machine is practically as good as another; and the product is so uniform that anyone can buy the goods in any shop. But by the definition which the Supreme Court gave in S.C. Cambatta & Co. (P.) Ltd. v. CEPT  41 ITR 500 it may be said that this firm had a goodwill...(p. 447) We, therefore, reverse the finding of the Controller (Appeals) that the firm of Vimal and Amar Talkies had no goodwill. Since he had excluded its value from the assessment on this ground alone and had not dealt with the other contentions of the assessee that even if the firm had goodwill, it did not pass on the death of the deceased, we set aside his order and restore it to his file for dealing with this contention.
We direct him to hear the assessee and the Assistant Controller and then give finding as to whether the value of the assessee's share in the goodwill passed on his death so as to be included in the assessment for the purpose of estate duty.