Estate duty on partnership assets was confined to the deceased's remaining share where the son's labour constituted adequate consideration.

Estate duty valuation of partnership interests was limited to the deceased's remaining one-fourth share in the goodwill and tenancy rights. The Revenue had to show that the disputed interests were gifted without adequate consideration, but the son's admission as a partner, the later change in profit-sharing, and his contribution of labour and participation in the business constituted sufficient consideration. On that basis, the arrangement was not treated as a gift, and section 10 did not extend the dutiable estate beyond the deceased's surviving share. The Tribunal's inclusion of only one-fourth of the goodwill and tenancy rights in the principal value of the estate was therefore upheld.

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Issues: Whether, on the facts and in the circumstances of the case, the Tribunal was right in directing inclusion of only the value of 1/4th of the goodwill and tenancy rights in the principal value of the estate passing on the death of the deceased.

Analysis: The relevant provisions of the Estate Duty Act required the Revenue to establish that the deceased had made gifts of the disputed share in the goodwill and tenancy rights and that such gifts were not for adequate consideration. The arrangement by which the son was admitted as a partner, and later the profit-sharing ratio was altered, carried an express obligation that the business would be conducted by both partners in mutual consultation. The son's devotion of time, energy, and physical labour to the business constituted sufficient consideration for the shares allotted to him, including the interest referable to goodwill and tenancy rights. On that footing, the transactions could not be treated as gifts without adequate consideration, and the further question under section 10 as to continued possession and enjoyment by the donor did not arise.

Conclusion: The Tribunal was correct in holding that only the deceased's 1/4th share in the goodwill and tenancy rights was includible in the principal value of the estate, and the question was answered in the affirmative in favour of the assessee.

Final Conclusion: The estate duty valuation was confined to the deceased's remaining interest in the partnership assets, and section 10 did not operate to enlarge the dutiable estate beyond that share.

Ratio Decidendi: Where a partner's admission and subsequent increase in share are supported by the working partner's labour and participation in the business, the transfer is for adequate consideration and does not amount to a gift liable to estate duty under section 10.

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