Genuine partnership requirement bars tax registration where the deed is sham and the assessee cannot prove real partners.

Income-tax registration of a firm is available only where the partnership instrument reflects a real and genuine partnership, and the revenue may refuse registration if direct or circumstantial evidence shows the deed is sham, bogus, or a device to evade tax. The assessee seeking registration bears the burden of proving that the partnership in fact existed and that the named partners were actual partners. Factors such as absence of a timely deed, no profit division, no capital contribution, and continued dependence on the alleged partners may support a finding that no genuine partnership existed.

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Issues: (i) Whether the Income Tax authorities could refuse registration of a firm where the instrument of partnership was found to be a sham or not a genuine partnership deed; (ii) whether the burden lay on the assessee seeking registration to prove the existence of a real partnership and the status of the persons named as partners.

Issue (i): Whether the Income Tax authorities could refuse registration of a firm where the instrument of partnership was found to be a sham or not a genuine partnership deed.

Analysis: The statutory right to registration under the relevant provisions extended only to a real and genuine instrument of partnership. The authorities were entitled to examine direct and circumstantial evidence to determine whether the document actually embodied a bona fide partnership or was merely a device to evade tax. If the so-called deed was bogus and the persons described as partners were only dummies, the authorities were not bound to register the firm.

Conclusion: The authorities could lawfully refuse registration if the partnership instrument was found to be not genuine.

Issue (ii): Whether the burden lay on the assessee seeking registration to prove the existence of a real partnership and the status of the persons named as partners.

Analysis: The application for registration was made by the assessee, and it was therefore for the assessee to establish that a partnership in fact existed and that the persons named in the deed were actual partners. The surrounding circumstances, including the absence of a timely deed, non-division of profits, lack of capital contribution, and continued dependence of the alleged partners on the father, supported the inference that the alleged partners were not real partners.

Conclusion: The burden was on the assessee, and it was not discharged.

Final Conclusion: The application failed because the alleged partnership was found to be unreal and the assessee did not prove a genuine firm entitled to registration.

Ratio Decidendi: For registration under the income-tax law, the assessee must prove a real and genuine partnership, and the revenue authorities may refuse registration where the instrument is shown by direct or circumstantial evidence to be a sham or bogus arrangement.

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