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Issues Involved:
1. Whether the interest of the deceased in the firm was property within the meaning of the Estate Duty Act. 2. Whether the value of the deceased's interest in the partnership included the goodwill of the firm. 3. Whether the value of the goodwill would be exempt under section 26(1) of the Act (not pressed). Issue-wise Detailed Analysis: 1. Whether the interest of the deceased in the firm was property within the meaning of the Estate Duty Act: The court examined the nature of a partner's interest in the assets of a partnership firm. It was argued by the accountable person that a partner has no specific interest in any partnership asset during the subsistence of the partnership. However, the court found that each partner has a proprietary interest in the partnership's assets, including the goodwill, even during the partnership's subsistence. This interest is considered "property" under section 2(15) of the Estate Duty Act, which includes "any interest in property, movable or immovable." The court concluded that the interest of the deceased in the partnership, including his share in the goodwill, was indeed property within the meaning of the Act. 2. Whether the value of the deceased's interest in the partnership included the goodwill of the firm: The main contention revolved around clause (10) of the partnership agreement, which stipulated that on the death of any partner, the partnership would not dissolve and the deceased partner would have no right in the goodwill. The court had to determine whether this clause prevented the deceased's share in the goodwill from passing to his heirs and thus being liable to estate duty. The accountable person argued that due to clause (10), the deceased's interest in the goodwill ceased on his death and did not pass to his heirs. The court, however, noted that the interest in the goodwill, as part of the deceased's total interest in the partnership assets, should be considered in the valuation. The Tribunal had previously held that the value of the goodwill passed on the death of the deceased and was liable to estate duty, relying on the Privy Council's decision in Perpetual Executors and Trustees Association of Australia Ltd. v. Commissioner of Taxes. The court further discussed whether the interest in the goodwill ceased upon death and whether any benefit accrued to the surviving partners. It was established that the interest in the goodwill did cease on death, and the surviving partners' interest in the goodwill was augmented, thus constituting a benefit under section 7 of the Act. However, the court also considered whether this benefit could be valued under section 40, which requires the property to be capable of yielding income. Since goodwill, standing alone, does not yield income, the court concluded that the benefit could not be valued under section 40, and thus, the cesser of interest in goodwill did not attract estate duty under section 7. 3. Whether the value of the goodwill would be exempt under section 26(1) of the Act: This issue was not pressed by the accountable person and therefore was not considered by the court. Conclusion: The court answered the first question in the affirmative, recognizing the deceased's interest in the partnership as property under the Estate Duty Act. The second question was answered in the negative, concluding that the value of the deceased's interest in the partnership did not include the goodwill for estate duty purposes due to the inability to value the benefit under section 40. The third question was not addressed as it was not pressed. The reference was disposed of without any order as to costs.
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