Goodwill and estate duty: a non-transferable agency business created no includible goodwill in the deceased partner's estate.

Goodwill requires a transferable commercial advantage arising from the reputation, connection and patronage of a business. Where a business is carried on only under a short-term, non-transferable licence or agency arrangement that can be cancelled at the grantor's pleasure, it does not create goodwill capable of separate sale or transfer. On the stated facts, the firms' rights to carry on business were temporary and dependent on such arrangements, so no goodwill existed for estate duty purposes and no share of goodwill could be included in the deceased partner's estate.

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Issues: Whether the firms carried on business under non-transferable licences and agency agreements had any goodwill capable of inclusion in the deceased partner's estate for estate duty purposes.

Analysis: Goodwill is the benefit and advantage arising from the good name, reputation and connection of a business. Where the business is conducted only under a short-term licence or agency arrangement that is not transferable and is liable to cancellation at the grantor's pleasure, the business does not yield a transferable commercial advantage of the kind that constitutes goodwill. On the facts, the firms' rights to carry on the business were temporary, dependent on agency arrangements and licences, and could not be sold or transferred.

Conclusion: The firms had no goodwill, and no share of goodwill could be included in the deceased partner's estate. The question was answered in the affirmative and in favour of the accountable person.

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