Judgment :- RAMACHANDRA IYER C. J. These two references arise under section 64(1) of the Estate Duty Act during the course of assessment to duty of the estate left by the late K. S. Ambi Iyer who was running a hotel at Madras. He died in a railway accident on September, 27, 1954. He is survived by his two sons who were living with him. One of them was a minor at the time of his death. They are now the accounting persons for the purpose of levy of estate duty. The deceased, Ambi Iyer, started life by establishing a hotel at Vellore, originally under the name of Ambika Lunch Home and later on as Ambi's Cafe. The business prospered and in course of time a meals section and lodging house were added to the coffee hotel. In 1935 a branch of the business was opened at Broadway, Madras, very near the Law College where the premises were taken on lease. This business also flourished. Some years thereafter, the business at Vellore was entrusted to other persons and ultimately it was closed down. During the course of his life, Ambi Iyer acquired several items of moveable and immoveable properties all of them together being now assessed to the value of Rs. 2, 90, 958. This valuation of the assets is not now contested. It is also not disputed that the properties were acquired out of the income from the hotel business. But the accounting persons contended before the Assistant Controller of Estate Duty that the business run by the deceased was a joint family business started with the aid of ancestral nucleus in which the sons of the deceased (accountable persons) had an interest along with their father and that the entire property having survived to them, the interest of the deceased which ceased on his death should be evaluated in accordance with the provisions of section 7 of the Estate Duty Act. They also stated that the goodwill of the business should be valued at Rs. 1, 000 The Assistant Controller, however, rejected the case that the business run by the deceased was a joint family concern and he, therefore, brought to duty the entire estate left by the deceased, Ambi Iyer, as his separate property. They also stated that the goodwill of the business should be valued at Rs. 1, 000 The Assistant Controller, however, rejected the case that the business run by the deceased was a joint family concern and he, therefore, brought to duty the entire estate left by the deceased, Ambi Iyer, as his separate property. The accountable persons who originally conceded that the goodwill attached to the business of Ambi's cafe had a value and estimated the same at Rs. 1, 000, took up a different stand before the Assistant Controller, namely, the goodwill of the business had no value at all. The Assistant Controller refused to accept this plea and taking the average annual income on the basis of the profits earned for five years preceding the death of Ambi Iyer, he valued the goodwill attached to the business at three years' purchase and assessed it in a round figure of Rs. 45, 000. There was an appeal by the accountable persons to the Central Board of Revenue against this assessment. The Central Board of Revenue affirmed the view of the Assistant Controller that the hotel business run by the deceased and the properties acquired from and out of the profits thereof were his separate properties, the accounting persons having no interest therein during the lifetime of the deceased. The Board, however, held that the value fixed by the Assistant Controller for the goodwill of the business was excessive in view of the fact that the premises where the business was run did not belong to the deceased, but was merely held under a precarious tenancy and reduced the value of the goodwill to Rs. 25, 000. At the request of the accountable persons, the Board has referred for the opinion of this court the following two questions which respectively conform to the subject of reference in T. C. No. 109 of 1958 and 81 of 1960 " 1. Whether on the facts and circumstances of the case, the estate of the late Ambi Iyer was a joint family property in which he had only one-third share or was it his separate property ? 2. Whether the hotel business of Ambi Iyer had any goodwill and if such a goodwill had to be assessed as property, what was the basis of such assessment ? " * Question No. 1. 2. Whether the hotel business of Ambi Iyer had any goodwill and if such a goodwill had to be assessed as property, what was the basis of such assessment ? " * Question No. 1. As stated earlier there is no controversy that the properties left by the deceased were acquired by the late Ambi Iyer out of the profits from his coffee hotel business run by him at Vellore and at Madras. The case for the accountable persons is that the nucleus for the business at Vellore was provided from and out of the sale proceeds of an ancestral land owned by the deceased at Konnuseri near Palghat and that therefore the properties acquired from out of the profits of the business would be joint family properties. It is clear from the evidence that Ambi Iyer had obtained at a partition a small area of agricultural land in Konnuseri in South Malabar District. On September 30, 1924, that property was sold for a sum of Rs. 600. The need for the sale is not disclosed in the document. One Rao Saheb Arni Srinivasa Mudaliar who was at one time chairman of Arni Municipality has sworn to an affidavit that the coffee hotel business at Vellore was started by the deceased, Ambi Iyer, in 1924, on his advice, and that he had advanced loans on occasions to the deceased, Ambi Iyer. Three other affidavits are also in evidence. The first is by Sivakrishna Iyer aged about 83 years who is the paternal uncle of the deceased. He categorically states that Ambi Iyer, with the proceeds of the sale of his family property in Malabar started the coffee hotel business at Vellore. The brother-in-law of the deceased, one K. N. Krishna Iyer, who subsequently took on lease the hotel business at Vellore, has also sworn to the same fact in his affidavit. He categorically states that Ambi Iyer, with the proceeds of the sale of his family property in Malabar started the coffee hotel business at Vellore. The brother-in-law of the deceased, one K. N. Krishna Iyer, who subsequently took on lease the hotel business at Vellore, has also sworn to the same fact in his affidavit. K. R. Swami Iyer, a cousin of the deceased, who claims to have been associated with the latter right from the beginning when he started his business at Vellore confirms that statementThe Assistant Controller and the Central Board of Revenue have rejected the evidence afforded by these affidavits on the ground that no independent evidence had been produced as the last three persons were closely related to the deceased and that it was highly doubtful whether Rao Sahib Srinivasa Mudaliar would have remembered after all these years the exact year in which the late Ambi Iyer started his hotel business at Vellore. There was, however, no justification for the Central Board of Revenue to doubt the veracity of these persons as there was no other evidence apart from a few circumstances, which we shall examine presently, to discredit them. The three relations of the deceased are possibly the best persons who could speak about the origin of the business run by the deceased ; indeed theirs' was the only evidence before the authorities. If the Board of Revenue suspected that the evidence might be interested, they should have called upon the accountable persons to produce those persons before them for the purpose of cross-examination as to their knowledge, interest, etc. This, however, was not done. Under those circumstances it was not open to the Central Board of Revenue to simply reject the uncontradicted evidence before them and then say that there was no proof that the amount got from the sale of the ancestral property provided the nucleus for the starting of the business by the deceased. Apart from this the Central Board of Revenue has referred to three relevant circumstances which in their view showed that the business was not a joint family business. Reference is first made to two leases in respect of the Vellore business granted by the deceased in favour of K. N. Krishna Iyer, wherein it has been mentioned that Ambi Iyer was the owner of the business. Reference is first made to two leases in respect of the Vellore business granted by the deceased in favour of K. N. Krishna Iyer, wherein it has been mentioned that Ambi Iyer was the owner of the business. It is pointed out that there was no reference in those documents to the business being a joint family concern. It is true that the documents show that the property and the business were those of the deceased but they do not say that they were his self-acquired properties. In a joint Hindu family the father or the manager so completely represents the other coparceners of the family in regard to transactions with third parties that it is not necessary for the names of the other members being mentioned therein or to recite that the property is dealt with on their behalf as well. No inference therefore can be drawn either way by the mere fact that the lease of the business was granted by the father in his own name. The second circumstance relied on to discredit the evidence afforded by the affidavits is that the deceased while submitting his income-tax returns showed his status as an individual and not as the karta of a Hindu undivided family. There can be no doubt that this conduct is against the contention of the accountable persons particularly so because if the deceased had really been assessed as an undivided Hindu family there would be a reduction in the amount of tax payable. But it must be, remembered that the accountable persons were born to the deceased only subsequent to the establishment of the hotel business. It is just possible that originally the income-tax returns were submitted as an individual by the deceased and that practice was presumably continued even after sons were born to him. In the absence of other evidence to show that Ambi Iyer ever claimed his business as his separate property as against his sons, the assessment to income-tax cannot be taken as decisive of the question at issueSometime after Ambi Iyer's death, his sons had to submit their returns as his legal representatives in respect of the income earned from the properties after the death of their father. It is stated that in such returns their status was shown as an individual. It is stated that in such returns their status was shown as an individual. We cannot, however, attach much importance to this circumstance ; for it cannot be otherwise when the sons were assessed in respect of their father's liability on succession. Secondly, the probative value of this circumstance is considerably minimised when we find that almost simultaneously, that is, on April 25, 1955, the sons have claimed in their letter to the Income-tax Officer, Estate Duty-cum-Income-tax Circle, Madras, that they were members of a joint Hindu family along with their father and that the properties were joint family properties. None of the above circumstances can therefore outweigh the uncontradicted evidence afforded by the affidavits. It is clear on the materials available in the case, that the Vellore business must have been started in 1924. Ambi Iyer, who was a keen businessman would not have frittered away the money he got by the sale of his ancestral property in the same year but on the other hand he would in all probability have invested it in the business. This is a reasonable inference from the fact that he sold his property in 1924, and the business at Vellore was also started in the same year. We are, therefore, of the opinion that on the materials on record the only inference deducible is that Ambi Iyer started his coffee hotel business at Vellore with the proceeds got by the sale of his ancestral property and that the business and acquisitions made from the profits earned therefrom really formed part of the assets of the joint family, which survived to the accountable persons on the death of their father The estate left by Ambi Iyer should, therefore, be valued in accordance with section 7 of the Estate Duty Act. We answer the question referred to us in T. C. No. 109 of 1958 that the property is joint family property and in favour of the accountable personsQuestion No. 2 : The first aspect of the question referred to us is substantially one of fact. We have only to consider whether there are materials in the case to sustain the conclusion arrived at by the Assistant Controller and the Central Board of Revenue that the hotel business of the assessee had a goodwill. We have only to consider whether there are materials in the case to sustain the conclusion arrived at by the Assistant Controller and the Central Board of Revenue that the hotel business of the assessee had a goodwill. The goodwill of a business is the intangible value to it independent of its visible assets by reason of the business being a well established one having a good reputation. Generally where the owner of a business sells it as such, the goodwill enables the purchaser to trade as a recognised successor to the business. It has been recognised that the business reputation or goodwill owned by a partnership or by a company is a valuable asset which can be disposed of at the time of the winding up of the concern. But at the same time it is obvious that goodwill is inseparable from the business to which it adds value. In Inland Revenue Commissioners v. Muller and Co.'s Margarine Ld. Lord Macnaghten observed " What is goodwill ? It is a thing very easy to describe, very difficult to define. It is the benefit and advantage of the good name, reputation and connection of a business. It is the attractive force which brings in custom. It is the one thing which distinguishes an old established business from a new business, at its first start. The goodwill of a business must emanate from a particular centre or source. However widely extended or diffused its influence may be, goodwill is worth nothing unless it has power of attraction sufficient to bring customers home to the source from which it emanates. Goodwill is composed of a variety of elements. It differs in its composition in different trades and in different businesses in the same trade. One element may preponderate here and another element there. To analyse goodwill and split it up into its component parts, to pare it down as the commissioners desire to do until nothing is left but a dry residuum ingrained in the actual place where the business is carried on while everything else is in the air seems to me to be as useful for practical purposes as it would be to resolve the human body into various substances of which it is said to be composed. The goodwill of a business is one whole and in a case like this, it must be dealt with as such." * Under the Estate Duty Act, duty is payable on the principal value of the property passing or deemed to pass on the death of a person. Section 36 of the Act defines the principal value as being the price which, in the opinion of the Controller, the property would fetch if sold in open market at the time of the death of the deceased. It may be taken as well settled that in assessing estate duty, the goodwill of a business left by the deceased would be taken as property passing on his death and in estimating the value of the estate the Controller will have to fix its value. An established business with a reputation behind it generally consists of certain tangible assets and also the goodwill acquired by reason of its standing and reputation, the use of the latter having an undoubted value to its successor. The value of the goodwill of a business while assessing estate duty will, therefore, be the value which a reasonable and prudent buyer would give for the business as a going concern minus the value of the tangible assets. As stated in Law of Death and Gift Duties in New Zealand (2nd edn.) by Adam " Goodwill has had many definitions. In death and gift duty matters, however, it simply means an additional value over and above the value of the tangible assets which a reasonable prudent buyer would give for the business as a going concern. In all these cases we have to ascertain what that hypothetical purchaser would be likely to pay for the business or for the deceased's or donor's share therein. To value the goodwill the value of the business and all its assets as a going concern should first be obtained and from this should be deducted the value of the tangible assets leaving the balance as the true value of the goodwill." * Ambi's Cafe at Madras was established as early as 1935, in an important locality. The accountable persons themselves originally admitted that there was a goodwill attached to the business and valued it at Rs. 1, 000. The accountable persons themselves originally admitted that there was a goodwill attached to the business and valued it at Rs. 1, 000. The business expanded considerably since its inception and the late Ambi Iyer himself thought it fit to close down his Vellore business probably for the reason of the increased prosperity of the Madras business. There can be no doubt that on the materials available Ambi's Cafe was an established business at the time of the death of Ambi Iyer. It should also have acquired a reputation. We are, therefore, of the opinion that the hotel business of the deceased had a goodwill. The next point for consideration is how to value such goodwill. There can be no doubt that the nature and class of business is an important factor in the matter of assessing the value of the goodwill of a business. Mr. Thyagarajan appearing for the accountable persons contended that as the running of a coffee hotel business depended upon the skill of the person managing it no goodwill value can be attached to such a business on his death. We cannot agree. The business of Ambi's Cafe was admittedly a large one employing as it did a number of persons. The situation of the business in the heart of the city would undoubtedly have contributed to acquire for it during all these years a reputation which can be said to be independent of the personal factor. After all Ambi Iyer did nothing for the business except to manage it. The reputation of a hotel arises mostly by reason of the quality of the articles supplied by it and the amenities it provides for its customers. It was then contended that as the reputation of the business was acquired purely out of its local situation no value could be attached to the goodwill as the right to the premises in which the business was run was a precarious one having no market valueIn Inland Revenue Commissioners v. Muller and Co's. Margarine Ld., Earl of Halsbury L.C. observed " The right to trade under the name of a firm which has acquired a reputation is not confined to a particular locality or to any particular premises. The right would remain if the business were transferred to another site elsewhere or if the premises were entirely altered. The right would remain if the business were transferred to another site elsewhere or if the premises were entirely altered. In the case of a public house owing to the convenience of its situation and its being known as a favourite place of resort, the advantages of its situation are so mixed up with the goodwill of the business that as a matter of fact it may well be that it is very difficult to sever them and to say how much is goodwill and how much is local situation. But those difficulties of fact will not necessarily make their separate existence impossible." * Once such separate existence is possible the valuation has to be made under the provisions of section 36 of the Estate Duty Act. There are no materials on record to show what the terms of the tenancy were under which the late Ambi Iyer held the premises for the purpose of his business, whether it was a lease for a term or one at will, even assuming, that the tenancy was one at will there was a statutory protection afforded to the lessee by reason of the Madras Buildings (Lease and Rent Control) Act, 1951. That statutory right was, of course, not alienable but it would have a value in the hands of the legal representatives of the deceased who were given the same protection under the statute as the deceased. We are, therefore, of the opinion that although the fact that the deceased had only a leasehold interest in the business premises has a material bearing in valuing the goodwill of the business and although the locality of the business does contribute its own value to it, a proper valuation can still be made for the good will after making due allowance for these mattersThe Assistant Controller considered while assessing the value of the goodwill of the business, the nature of the business, the risks involved, skill in management, location, future competition, trade name, money market conditions and trend of profits in the business and estimated the goodwill at three years' purchase on the basis of the average annual profits for five years immediately preceding the date of valuation as a proper one. Mr. Thyagarajan contended that in so valuing the goodwill the Assistant Controller did not make allowance for interest on the capital advanced. Mr. Thyagarajan contended that in so valuing the goodwill the Assistant Controller did not make allowance for interest on the capital advanced. We shall presently show that for making a rough and ready valuation that factor does not enter into computation. The Central Board of Revenue took into consideration the absence of a long term lease agreement in favour of the hotelier and reduced the value to Rs. 25, 000 which works out to about 1 1/2 years' assessed profits. In J. R. Batliboi's Advanced Accounting (20th edition at page 888) it is stated that a rough and ready method that is largely employed for ascertaining the value of the goodwill of a business is to take it as being worth one to three years' purchase of the annual profits of the business, such profits being based on the average annual profits of the two to five years immediately preceding the date of such valuation without any deduction in respect of interest on capital and owner's services. It was this principle that was adopted both by the Assistant Controller and by the Central Board of Revenue, the former putting it at three years' purchase while the latter reducing it to nearly less than half thereof. It is no doubt true that if one of the two methods recognised in Dymond's Death Duties (13th edition, page 511) were to be adopted, allowance has got to be made for interest on capital. But under that method the number of years' purchase will have to be increased. Taking the entire circumstances into consideration we cannot say that the procedure adopted by the Central Board of Revenue is opposed to Sound priniciples of accounting. While answering the question referred to us in T. C. No. 81 of 1960 in the manner indicated above we hold that the assessment of the value of the goodwill attached to Ambi's Cafe by the Central Board of Revenue is unassailable. There will be no order as to costsQuestions answered accordingly.