Partnership goodwill surrendered without consideration was treated as a gift under estate duty law, while the garage exemption was upheld.

A partner's relinquishment of her share in partnership goodwill on dissolution, without identifiable consideration, was treated as a gift and brought within section 9 of the Estate Duty Act; the goodwill addition was therefore sustained. The claimed indemnity against liabilities was not accepted as consideration on the facts. The exemption under section 33(1)(n) for the garage valued at Rs. 2,000 was upheld, as no error was shown in allowing that relief. The result was that the revenue addition relating to goodwill stood, while the exemption on the garage was maintained.

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Issues: (i) whether the deceased's relinquishment of her share in the goodwill of the partnership, without receipt of consideration, attracted section 9 of the Estate Duty Act; and (ii) whether exemption under section 33(1)(n) of the Estate Duty Act was available in respect of the garage valued at Rs. 2,000.

Issue (i): whether the deceased's relinquishment of her share in the goodwill of the partnership, without receipt of consideration, attracted section 9 of the Estate Duty Act.

Analysis: The goodwill of the business was acknowledged in the partnership and dissolution deeds, and the deceased had a 60% share in it at the time of retirement. On dissolution, the entire goodwill went to the continuing partner, while the deceased received no identifiable consideration for giving up her right in that asset. The alleged indemnity against liabilities did not amount to tangible consideration on the facts, and the authorities cited on selective inclusion of goodwill were distinguished because the deceased had ceased to be a partner before death and the dissolution deed specifically showed that goodwill alone was surrendered without consideration.

Conclusion: The relinquishment of goodwill amounted to a gift within section 9 of the Estate Duty Act, and the addition of Rs. 34,500 was correctly made; this issue was decided against the accountable person.

Issue (ii): whether exemption under section 33(1)(n) of the Estate Duty Act was available in respect of the garage valued at Rs. 2,000.

Analysis: The Appellate Controller's treatment of this claim was found to be adequate and no error was shown in the allowance of the exemption.

Conclusion: The exemption claim was upheld in favour of the accountable person.

Final Conclusion: The appeal succeeded only in relation to the goodwill addition and failed on the exemption issue, leaving the revenue's addition undisturbed while maintaining the relief granted on the garage.

Ratio Decidendi: Where a partner relinquishes her share in partnership goodwill on dissolution without receiving consideration, the transfer is treated as a gift and is includible to the extent attracted by section 9 of the Estate Duty Act.

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