Partnership goodwill passes on a partner's death and forms part of the estate for estate duty valuation.

On the death of a partner in a continuing partnership, the Calcutta HC noted that the deceased's interest in the firm passed as an interest in the entire undertaking and therefore included goodwill, even where the deed provided that the firm would not dissolve and excluded legal representatives from goodwill. That devolution clause was treated as immaterial for estate duty purposes. The deceased partner's share was thus includible in the estate, and the valuation of that interest had to be made under the statutory estate duty valuation provisions on the basis of the whole partnership share, not by isolating goodwill alone.

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Issues: Whether, on the death of a partner in a continuing partnership, the deceased's share in the firm's goodwill passed so as to be includible in the estate for estate duty purposes.

Analysis: The partnership deed provided that the firm would not dissolve on the death or retirement of a partner, but that clause did not prevent the deceased partner's share in the undertaking from passing on death. The Court treated the deceased partner's interest as an interest in the entire unit of the firm, and held that such interest necessarily included goodwill. The mode of devolution under the deed, or the exclusion of legal representatives from the goodwill, was held to be immaterial for estate duty. The valuation of that interest had to be made under the statutory valuation provisions applicable to estate duty, on the basis of the deceased's entire share in the firm.

Conclusion: The deceased's share in the goodwill passed on death and was includible in the estate, though the proper valuation had to be made in accordance with the Act and Rules.

Final Conclusion: The reference was answered in substance in favour of the revenue, with the Court affirming that goodwill formed part of the deceased partner's estate and had to be brought to charge, while leaving valuation to be made under the statutory scheme.

Ratio Decidendi: In a partnership, the deceased partner's share in the firm includes goodwill, and that entire interest passes on death for estate duty purposes notwithstanding any clause continuing the firm or altering devolution, so the whole share must be valued under the estate duty valuation provisions.

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