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Issues: Whether the deceased partner's share in the reserve fund, goodwill and profit up to the date of death was liable to be included in the dutiable estate under the Estate Duty Act, despite partnership deed clauses excluding the legal heirs from those items.
Analysis: The partnership deed restricted the deceased partner's entitlement to a share in the reserve fund, goodwill and proportionate profit on death. The decisive question was whether, for estate duty purposes, the deceased's interest in the firm ceased on death or whether property in that interest passed within the meaning of section 5 of the Estate Duty Act, 1953. The Tribunal preferred the view that the deceased's entire interest in the partnership, including goodwill, did not get extinguished merely because the deed excluded the heirs from direct entitlement. On death, that interest devolved upon the surviving partners and the share in goodwill stood augmented to the extent of the deceased's interest. The authorities and the case law relied upon supported inclusion of the value of the deceased partner's entire interest in the firm in the principal value of the estate.
Conclusion: The amount relatable to the reserve fund, goodwill and profit up to the date of death was held includible in the dutiable estate, and the exclusion granted by the Appellate Controller was set aside.
Ratio Decidendi: For estate duty purposes, a deceased partner's interest in the partnership, including goodwill, is treated as property passing on death and remains includible in the estate even if the partnership deed excludes the heirs from claiming those specific components.
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