Goodwill on partnership retirement was not a deemed disposition where the deed vested it in surviving partners and no transfer to relatives was shown.

A partnership deed providing that, on retirement, the business would continue and the goodwill would vest in the surviving partners meant the outgoing partner received only the balance due on accounts. In the absence of any affirmative act by the deceased showing a disposition of goodwill in favour of relatives who later became partners, no transfer or deemed disposition arose for estate duty purposes. Accordingly, section 9 read with section 27 of the Estate Duty Act, 1953 was not attracted, and the finding was in favour of the assessee.

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Issues: Whether, on the facts and in the circumstances of the case, the deceased's retirement from the partnership involved a disposition in favour of his relatives so as to attract section 9 read with section 27 of the Estate Duty Act, 1953 in relation to the goodwill of the firm.

Analysis: The partnership deed expressly provided that on a partner's retirement the business would continue, the goodwill would belong to the surviving partners, and the outgoing partner would receive only the amount found due on accounts. In the absence of any material showing that the deceased made a disposition in favour of the grandsons who later became partners, the retirement could not be treated as a transfer or disposition of goodwill to relatives. On the facts, the Tribunal's finding that no disposition had been made was supported by the terms of the partnership agreement.

Conclusion: The question is answered in the negative. The provisions of section 9 read with section 27 of the Estate Duty Act, 1953 were not attracted, and the finding was in favour of the assessee.

Ratio Decidendi: Where a partnership deed provides that goodwill on retirement vests in the surviving partners and the record discloses no affirmative act of disposition by the deceased in favour of relatives, no deemed disposition arises for estate duty purposes under section 9 read with section 27 of the Estate Duty Act, 1953.

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