No partnership where parties only shared commission income and did not carry on business together, denying firm registration.

A mere right to receive and share commission did not amount to a partnership, because the parties were not carrying on a business together and the employment of staff and maintenance of accounts served only to verify and safeguard receipt of income. Under the Partnership Act, sharing profits or common receipts alone does not create a firm unless there is active business activity by the parties. On the facts, the relationship was treated as co-ownership or an association of persons rather than a partnership, and as no valid firm existed, registration under section 26A of the Income-tax Act, 1922 was not available.

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Issues: Whether the arrangement between the assessees constituted a partnership within the meaning of the Partnership Act and, if so, whether the firm was entitled to registration under the Income-tax Act, 1922.

Analysis: The arrangement showed only a right to receive and share commission already earned from the company. The employment of staff and maintenance of accounts were found to be directed only to verifying and safeguarding the receipt of that income, not to carrying on a business by active endeavour or to prosecuting or promoting any business activity. Under the Partnership Act, mere sharing of profits or common receipts does not by itself create a partnership unless there is a business carried on by the parties. On the facts found, the real relationship was that of co-owners or an association of persons, and the essential element of business activity was absent. Since a valid and genuine firm must actually exist before registration can be granted under section 26A, the rejection of registration was justified.

Conclusion: There was no partnership in law, and the assessees were not entitled to registration under section 26A.

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