Partnership deed must state both profit and loss shares for tax registration under section 26A; omission defeats eligibility.

For registration of a firm under section 26A of the Indian Income-tax Act, 1922, the partnership instrument had to specify the individual shares of the partners in both profits and losses, and those shares had to be ascertainable from the deed itself. The court treated this as a condition precedent to registration because the income-tax scheme required the officer to determine apportionment directly from the instrument, without resort to external presumptions, section 13 of the Partnership Act, or inference from a profit-sharing clause. A deed that stated profit shares but omitted loss-sharing arrangements therefore failed the statutory requirement, and the firm was not entitled to registration.

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Issues: Whether a firm seeking registration under section 26A of the Indian Income-tax Act, 1922 must have its partnership deed specify the individual shares of the partners in both profits and losses, and whether omission to state the shares in losses is fatal to registration.

Analysis: Registration under section 26A was available only to a firm constituted under an instrument of partnership specifying the individual shares of the partners. Read with the scheme of sections 23(5), 24 and 16(1)(b) of the Act, the provision was intended to enable the Income-tax Officer to ascertain from the instrument itself the respective shares of the partners for apportionment of income and for consequential treatment of losses. The statutory form and rules also contemplated disclosure of the share in the balance of profits or loss. The deed in question specified profit shares but did not clearly specify how losses were to be borne. The omission could not be cured by resort to section 13 of the Partnership Act or by inference from the profit-sharing clause, because the condition for registration had to be satisfied from the instrument itself and without outside implication. A minor admitted to the benefits of partnership did not remove the need for specification of loss-sharing arrangements among the partners.

Conclusion: The deed did not satisfy the requirements of section 26A, and the firm was not entitled to registration.

Final Conclusion: The reference was answered against the assessee, holding that registration could not be granted where the instrument failed to specify the partners' shares in losses as well as profits.

Ratio Decidendi: For registration of a firm under section 26A of the Indian Income-tax Act, 1922, the partnership instrument must itself specify the individual shares of the partners in both profits and losses, and such shares must be ascertainable without resort to external statutory presumptions or inference.

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