Partnership goodwill passes on death and is includible in estate duty valuation despite dissolution of the firm.

Goodwill of a partnership business is treated as part of the firm's property and an intangible asset reflecting reputation, customer connection and earning capacity. For estate duty valuation, the deceased partner's interest is valued on an open market basis and extends to the partnership assets, including goodwill. Dissolution of the firm on death does not, by itself, extinguish goodwill or prevent it from passing for estate duty purposes. The goodwill was therefore includible in the principal value of the estate, and the estate duty addition was sustained.

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Issues: Whether the goodwill of a partnership business constituted property passing on the death of a partner and was includible in the principal value of the estate for estate duty purposes.

Analysis: Goodwill is part of the property of the firm under the Partnership Act and is an intangible asset reflecting the business reputation, customer connection, location and earning capacity of the undertaking. For estate duty, property passing on death must be valued on an open market basis, and the deceased partner's interest extends to the entire partnership assets including goodwill. The fact that the firm stood dissolved on the death of a partner did not, by itself, destroy the goodwill or prevent its passing for estate duty purposes. The Tribunal's view that the goodwill lapsed with the dissolution was held to be unsupported by evidence and contrary to the settled legal position.

Conclusion: The goodwill of the business passed on the death of the deceased and its value was rightly included in the principal value of the estate. The questions were answered in favour of the petitioner.

Final Conclusion: The reference was allowed and the estate duty addition relating to goodwill was sustained.

Ratio Decidendi: Goodwill of a partnership business is an asset of the firm that passes with the deceased partner's interest on death and must be included in the estate for estate duty valuation, even if the firm is dissolved upon that death.

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