Goodwill in a continuing partnership was not treated as passing on death for estate duty purposes.

A partner has no exclusive ownership in any specific partnership asset during the subsistence of the firm; his interest is limited to profits while the partnership continues and to a share in net partnership assets on dissolution or retirement. On that principle, goodwill of a continuing partnership was treated as not passing as a specific asset to the heirs on a partner's death. Because the firm continued after death, no passing of an alleged share in goodwill occurred, and inclusion of that value in the principal value of the estate under the Estate Duty Act, 1953 was not justified.

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Issues: Whether the share of goodwill of a deceased partner in the assets of a continuing firm passes on his death so as to be includible in the principal value of the estate under the Estate Duty Act.

Analysis: A partner has no exclusive ownership in any specific item of partnership property during the subsistence of the firm. His right is confined to profits during continuance of the partnership and to a share in the net partnership assets on dissolution or retirement. Applying that principle, goodwill of a going concern is not a specific asset passing to the heirs on death in a continuing partnership. Since the firm continued after the partner's death, there was no passing of the alleged share in goodwill to attract estate duty under section 5 of the Estate Duty Act, 1953.

Conclusion: The question was answered in the negative and the inclusion of the value of goodwill in the estate was held to be unjustified, in favour of the assessee.

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