Goodwill in partnership firms passes on death and remains includible in the estate despite dissolution or later reconstitution.

Goodwill in a partnership business is an intangible asset tied to reputation, clientele, location, standing and business connections, and it is not negated merely because the firm trades in standard goods. Where the firms had long-standing names, clientele and contracts, surrounding conduct supported the existence of goodwill. On the death of a partner in a partnership at will, the firm may dissolve, but goodwill remains part of the firm's assets and, absent a contrary contract, passes with the estate on dissolution. Later reconstitution of the business, use of the same name and continuation at the same premises did not prevent passing of goodwill, and the recognised valuation method was upheld.

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Issues: Whether the valuation of goodwill of the six partnership firms was valid in law and whether such goodwill existed and passed on the death of the deceased.

Analysis: Goodwill is an intangible asset dependent on reputation, connections, location, standing, clientele and other business features, and it cannot be denied merely because the business deals in standard goods. The firms had been in existence for years, carried distinctive names, had clientele and contracts, and the surrounding conduct of the parties showed that goodwill was recognised. On the death of a partner in a partnership at will, the firm may stand dissolved, but goodwill remains an asset of the firm and, in the absence of a contract to the contrary, forms part of the assets to be dealt with on dissolution. Subsequent reconstitution of the business, use of the same name and carrying on the same business at the same place did not prevent the goodwill from having passed on death. The method of valuation adopted was also a recognised method and could not be faulted.

Conclusion: The valuation of goodwill was valid in law and the goodwill passed on the death of the deceased; the reference was answered against the accountable person and in favour of the Revenue.

Ratio Decidendi: Goodwill of a partnership business is property passing on death and is includible in the estate if it exists at the date of death, notwithstanding dissolution or later reconstitution of the firm, and may be valued by a recognised valuation method.

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