Managing agency goodwill is property and may be included in the estate using a profit-based valuation method.

A managing agency interest that yielded income was treated as property, so the deceased's share in the goodwill of the managing agency firms was includible in the estate. Restrictions arising from personal service features, approval requirements, or limits on transfer did not prevent the business interest from carrying goodwill. For valuation, the appellate authority's profit-based revaluation of goodwill, using actual profits over the relevant period instead of estimated profits, was accepted because no better method was shown. The reference was therefore answered in favour of the revenue on both issues, and the inclusion and valuation of goodwill were upheld.

---

---

Issues: (i) Whether any goodwill, or any value for such goodwill, could be attributed to the deceased's interest in the managing agency firms and included in the estate; (ii) Whether the basis adopted for valuation of the goodwill was in accordance with law.

Issue (i): Whether any goodwill, or any value for such goodwill, could be attributed to the deceased's interest in the managing agency firms and included in the estate.

Analysis: Managing agency was treated as a business, and a business interest capable of yielding income was recognised as property. The deceased had a right to receive share of income from the managing agency business, and a right to receive income from property is itself property. The fact that the managing agency arrangements involved personal service, required approvals, or were subject to restrictions on transfer did not destroy their character as property capable of carrying goodwill. The earlier Supreme Court view that managing agency is business and that business is property was applied, and the contrary argument based on later decisions concerning bare rights of management was held not to affect that position.

Conclusion: The deceased's share in the goodwill of the two managing agency firms was rightly included in his estate, against the accountable persons.

Issue (ii): Whether the basis adopted for valuation of the goodwill was in accordance with law.

Analysis: The appellate authority had already revalued the goodwill on the basis of actual profits earned over the relevant period, instead of the estimated profits used by the assessing authority. No better alternative method of valuation was suggested. In these circumstances, the adopted basis of valuation could not be successfully challenged.

Conclusion: The basis adopted for valuation of the goodwill was in accordance with law, against the accountable persons.

Final Conclusion: The reference was answered in favour of the revenue on both questions, and the inclusion and valuation of the goodwill in the estate were upheld.

Ratio Decidendi: A managing agency interest that yields income is property, and goodwill attached to that business can pass on death and be valued on a rational profit-based method.

---