The share of goodwill of a deceased partner in the assets of a firm does not pass on his death under the Estate Duty Act.

1. This reference under Section 64(1) of the Estate Duty Act, 1953 (hereinafter referred to as " the Act "), has been made by the Income-tax Appellate Tribunal, Chandigarh Bench, on the application filed by the Controller of Estate Duty, requesting the Appellate Tribunal to refer to this court a question of law which is said to have arisen out of the Tribunals order in EDA No. 2 of 1969-70. The Tribunal has referred the following question of law for our opinion :

" Whether, on the facts and in the circumstances of the case, the share of goodwill of a deceased partner in the assets of a firm passes on his death under the Estate Duty Act ?"

2. The facts of the case are as follows:

3. One Hari Ram was partner in the firms of Messrs. Hari Ram Kishori Lal and Messrs. Ved Parkash Vijay Kumar. He died on 26th April, 1966. The Assistant Controller of Estate Duty made an addition of Rs. 17,251 in the principal value of his estate representing his share of goodwill in the said two firms, in the following manner :

M/s. Hari Ram Kishori Lal Rs.8,134

M/s. Ved Parkash Vijay Kumar Rs.8,917

4. On appeal, the Zonal Appellate Controller of Estate Duty excluded the share of Rs. 8/134 in the goodwill of the firm of M/s. Hari Ram Kishori Lal as this firm had been dissolved and was not continued after the death of Hari Ram while the addition of Rs. 8,917 representing the share of goodwill of Hari Ram in the firm of M/s. Ved Parkash Vijay Kumar was confirmed. On Second appeal by the assessee, the Income-tax Appellate Tribunal, Chandigarh Bench, held that, on the death of Hari Ram, there was no passing of the property so far as the share in the goodwill was concerned and, accordingly, allowed the appeal. The Controller of Estate Duty filed an application for making a reference on which the aforesaid question was framed by the Tribunal for the opinion of this court.

5. The answer to the question posed by the Tribunal would not present much difficulty if we first find out the nature of interest of a partner in the partnership property and for that purpose reference may be made to the decision of the Supreme Court in Addanki Naryanappa v. Bhaskara Krishnappa, A.I.R. 1966 S.C. 1300 wherein their Lordships have described the nature of interest of a partner during the subsistence of a partnership and after its dissolution and the relevant observations read as under :

"From a perusal of these provisions it would be abundantly clear that whatever may be the character of the property which is brought in by the partners when the partnership is formed or which may be acquired in the course of the business of the partnership it becomes the property of the firm and what a partner is entitled to is his share of profits, if any, accruing to the partnership from the realisation of this property, and upon dissolution of the partnership to a share in the money representing the value of the property. No doubt, since a firm has no legal existence, the partnership property will vest in all the partners and in that sense every partner has an interest in the property of the partnership. During the subsistence of the partnership, however, no partner can deal with any portion of the property as his own. Nor can he assign his interest in a specific item of the partnership property to anyone. His right is to obtain such profits, if any, of fall to his share from time to time and upon the dissolution of the firm to a share in the assets of the firm which remain after satisfying the liabilities set out in Clause (a) and Sub-clauses (i), (ii) and (iii) of Clause (b) of Section 48. It has been stated in Lindley on Partnership, 12th edition, at page 375 : What is meant by the share of a partner is his proportion of the partnership assets after they have been all realised and converted into money, and all the partnership debts and liabilities have been paid and discharged. This it is, and this only which on the death of a partner passes to his representatives, or to a le