Goodwill in a professional partnership depends on facts, and cannot be presumed merely from carrying on legal practice.

A professional partnership may have goodwill only if the surrounding facts show a saleable and identifiable asset. Here, the Bombay High Court noted that the advocates' firm had no fixed trade name, its style changed with changes in partnership, no agreement recognised goodwill as an asset, and no special commercial advantage was proved. On that basis, the firm was held to have no goodwill capable of valuation. Because the firm dissolved on the partner's death and a new firm was thereafter constituted, no established goodwill existed to pass on death, and the valuation of goodwill in the estate was not sustained.

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Issues: (i) Whether the firm of advocates had any goodwill; (ii) whether any goodwill passed on the death of the deceased partner.

Issue (i): Whether the firm of advocates had any goodwill.

Analysis: A professional firm can, in an appropriate case, possess goodwill, but the existence of that asset depends on the facts and surrounding circumstances. Here, the firm had no fixed trade name, its style changed with changes in partnership, there was no express agreement recognising a saleable or valuing goodwill asset, and no special feature such as valuable location or comparable advantage was shown. The finding of goodwill could not rest merely on the general proposition that a professional firm may have goodwill.

Conclusion: The firm did not have goodwill capable of valuation.

Issue (ii): Whether any goodwill passed on the death of the deceased partner.

Analysis: Since the firm stood dissolved on the death of the partner and an altogether new firm was constituted thereafter, and since no established goodwill of the earlier firm was shown to exist, there was no goodwill asset that could pass on death.

Conclusion: No goodwill passed on the death of the deceased partner.

Final Conclusion: The reference was answered against the Revenue, and the valuation of goodwill in the estate was not sustained.

Ratio Decidendi: The existence of goodwill in a professional partnership is a question of fact to be determined from the surrounding circumstances, and it cannot be presumed merely because the firm carries on professional work.

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