Goodwill of dissolved partnership business did not devolve on death where the firm and dealership ended, with a fresh business arrangement formed.

Goodwill of a partnership business was treated as not passing on the death of a partner where the firm consisted only of the deceased and his son, the firm stood dissolved on death, and the dealership linked to the business also ended. The business was not carried on in the same form thereafter; instead, the surviving family members entered into a fresh partnership and obtained a new dealership under a new arrangement. In that setting, any goodwill in the earlier business ceased with dissolution and termination of the dealership and did not devolve on the surviving partner or legal heirs. The amount was therefore excluded from the estate chargeable to duty and the addition was deleted.

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Issues: Whether the goodwill of the partnership business passed on the death of the deceased so as to form part of the estate liable to duty under section 9 of the Estate Duty Act.

Analysis: The deceased and his son were the only partners. On the death of the deceased, the partnership stood dissolved and the dealership agreement with Hindustan Petroleum Corporation Ltd. also came to an end. The business did not continue in the same form, and the surviving family members entered into a fresh partnership and obtained a new dealership under a new arrangement. In these circumstances, no goodwill in the earlier business could be said to have devolved on the surviving partner or legal heirs, because the goodwill, if any, ceased with the dissolution of the partnership and termination of the dealership.

Conclusion: The goodwill did not pass on the death of the deceased and was not includible in the estate; the addition made on this account was deleted in favour of the appellant.

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