Retiring partner's unpaid surrender of goodwill was treated as a disposition and deemed gift, attracting estate duty.

A retiring partner's share in firm goodwill is property in which she has an interest, and on retirement she is ordinarily entitled to its value unless the partnership deed provides otherwise. The Estate Duty Act was applied broadly: the extinguishment of the deceased's right in favour of continuing partners constituted a disposition. Because she relinquished her goodwill share without consideration in favour of relatives, the transfer was treated as a gift. As the gift was made within two years of death, the value of that goodwill share was deemed to pass on death and was liable to estate duty.

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Issues: Whether a retiring partner's relinquishment of her share in the goodwill of the firm amounted to a disposition and gift so as to make the value of that share property passing on death liable to estate duty.

Analysis: Goodwill is property in which a partner has an interest, and on retirement a partner is ordinarily entitled to the value of her share in that asset unless the partnership deed provides otherwise. The expression "disposition" in the Estate Duty Act is of wide import, and includes the extinguishment at the expense of the deceased of a right in favour of another. When the deceased retired without receiving any value for her share in the goodwill, her right was extinguished in favour of the continuing partners. As those partners were relatives and no consideration was paid, the transaction was treated as a gift. Since the gift was made within two years of death, the property covered by it was deemed to pass on death under the charging provisions.

Conclusion: The value of the deceased's share in the goodwill of the firm was property passing on her death and was liable to estate duty.

Ratio Decidendi: A retiring partner's unpaid relinquishment of her share in goodwill amounts to a disposition by extinguishment of right, and if made in favour of relatives without consideration within the statutory period, it is a deemed gift passing on death for estate duty purposes.

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