Partnership goodwill and revaluation surplus pass on death for estate duty, despite a deed clause excluding legal representatives.

A partner's interest in the firm's goodwill and in the surplus arising from revaluation of assets was treated as property passing on death for estate duty purposes. Relying on section 14 of the Indian Partnership Act, 1932, the analysis states that firm property includes goodwill, and that the deceased retained a subsisting proprietary interest in the partnership assets at death. A partnership deed clause denying the retiring partner or legal representatives any claim to goodwill or revaluation surplus did not negate that interest. The result discussed is that such interests are includible in the principal value of the estate under the Estate Duty Act, 1953.

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Issues: Whether the deceased partner's share in the goodwill of the firm and in the surplus arising from revaluation of assets passed on death so as to be includible in the principal value of the estate for estate duty.

Analysis: Under section 14 of the Indian Partnership Act, 1932, the property of a firm includes goodwill. The deceased had a subsisting interest in the partnership assets at the time of death, and that interest was property passing on death. A clause in the partnership deed denying the retiring partner or legal representatives any claim to goodwill or revaluation surplus did not negate the existence of the deceased's proprietary interest in those assets at the time of death. The Court followed the view that goodwill and the benefit arising from revaluation of assets are part of the partner's interest in the firm and pass on death, attracting estate duty under the Estate Duty Act, 1953.

Conclusion: The deceased's share in the goodwill and the surplus on revaluation of assets was correctly included in the principal value of the estate, and the contention of the accountable person failed.

Ratio Decidendi: A partner's interest in the goodwill and other partnership assets constitutes property passing on death for estate duty purposes, and a partnership deed clause excluding the legal representatives from claiming such assets does not prevent inclusion of that interest in the estate.

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