Estate duty on partnership goodwill: a deceased partner's share was held includible in the principal value of the estate.

A deceased partner's share in the goodwill of a firm was treated as part of the property passing on death for estate duty under section 5 of the Estate Duty Act, 1953. The Court held that estate duty applies to property that passes by a change in beneficial interest, and a partner's interest extends to the partnership assets as a whole, including goodwill. Unless the partnership arrangement clearly extinguishes that right, goodwill devolves with the deceased partner's share in the firm. The share in goodwill was therefore includible in the principal value of the estate, and the reference was answered in favour of the Revenue.

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Issues: Whether the deceased partner's share in the goodwill of the firm formed part of the principal value of the estate chargeable to estate duty under section 5 of the Estate Duty Act, 1953.

Analysis: Estate duty under section 5 is attracted to property which passes on death, and the expression requires a change in beneficial interest, not merely a change in title. A partner's interest in the firm extends to the entire partnership assets, including goodwill. Goodwill is an intangible business asset attached to the firm and, absent a clear extinguishment of that right by the partnership arrangement, the deceased partner's interest in goodwill devolves as part of his share in the partnership assets. The Court distinguished decisions where partnership clauses expressly excluded goodwill or where the facts attracted section 7, and approved the view that the death of one of two partners does not prevent goodwill from forming part of the estate passing on death.

Conclusion: The deceased partner's share in the goodwill was includible in the principal value of the estate and the reference was answered against the accountable persons and in favour of the Revenue.

Ratio Decidendi: On the death of a partner, his interest in the entire partnership unit, including goodwill, passes for the purposes of estate duty under section 5, irrespective of the partnership deed's provision as to final devolution, unless the right is clearly extinguished by the terms of the arrangement.

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