Estate duty valuation of partnership goodwill turns on the deed for the deceased's share, but market value for survivors' benefit.

For estate duty purposes, a deceased partner's share in a firm, including goodwill, was to be valued according to the partnership deed where the deed expressly fixed the amount payable to the legal representatives. The deceased's interest passing on death was therefore assessed on the contractual basis. Separately, the cesser of that interest also conferred a distinct benefit on the surviving partners, and that benefit was to be measured by the market value of the goodwill, less the amount the survivors were contractually bound to pay under the deed. The earlier Australian authority was not treated as governing this separate valuation question.

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Issues: Whether, for estate duty purposes, the deceased partner's share in the firm including goodwill was to be valued in accordance with the partnership deed, and whether the surviving partners were liable to be assessed on the benefit accruing to them on the cesser of the deceased's interest by reference to the market value of the goodwill less the amount payable under the deed.

Analysis: The reference arose under section 64(1) of the Estate Duty Act, 1953 in relation to valuation of a deceased partner's interest in a partnership. The partnership deed expressly fixed the amount payable to the deceased partner's representatives for goodwill at Rs. 1,00,000. The property passing on death to the legal representative was the deceased's share in the partnership, including goodwill, and that share had to be valued according to the contractual terms of the deed. At the same time, the deceased's death also brought about a cesser of his interest, resulting in a corresponding benefit to the surviving partners. For that distinct benefit, the appropriate measure was the market value of the goodwill, but reduced by the amount the survivors were bound to pay under the deed. The earlier Australian authority did not govern the separate question of benefit accruing to the survivors.

Conclusion: The deceased's share, including goodwill, was correctly valued under the partnership deed for the estate of the deceased, but the surviving partners were chargeable on the benefit arising from the cesser of interest by reference to the market value of the goodwill less the contractual amount payable under the deed.

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