Bona fide partnership reconstitution did not create a gift of goodwill for estate-duty purposes; value excluded from estate.

A partner's son was inducted into the firm as part of a bona fide reconstitution to meet business needs, and the partnership deed showed equal rights in goodwill and tenancy rights among the partners. On those facts, the admission was not treated as a transfer of goodwill without consideration, so no gift of any portion of the goodwill arose for estate-duty purposes. The alleged value of the son's share in goodwill was therefore not includible in the estate, and the reference was answered in favour of the accountable person.

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Issues: Whether the admission of the deceased's son as a partner in the firm resulted in a gift of any portion of the goodwill of the business in his favour.

Analysis: The partnership deed showed that the original partners were elderly and unable to attend fully to the business, and that the sons of the original partners were inducted to work in the business instead of outsiders. The deed also provided that each partner would have an equal interest in the goodwill and tenancy rights. In these circumstances, the induction of the new partner could not be treated as a transfer of goodwill without consideration. The Tribunal's finding that no amount was includible in the estate on this account was supported by the reasoning in the record and by the treatment of similar issues in earlier references.

Conclusion: The admission of the son as a partner did not amount to a gift of any portion of the goodwill in his favour, and the value of the alleged share in goodwill was not includible in the estate.

Final Conclusion: The reference was answered against the Revenue and in favour of the accountable person.

Ratio Decidendi: Where a partner's son is inducted into a firm pursuant to a bona fide reconstitution for business needs and the arrangement shows consideration flowing to the firm, the admission does not constitute a gift of goodwill for estate-duty purposes.

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