Loss-sharing clause omission does not by itself defeat partnership registration when the deed and surrounding material show the intended arrangement.

A partnership firm cannot be denied continuation of registration under the Income-tax Act merely because the deed does not expressly state the partners' loss-sharing shares. The deed may be read as a whole, together with the accounts and other surrounding material, and in the absence of contrary indications the partners may be taken to have agreed to bear losses in the same proportion as profits. Where no minor is admitted to the benefits of partnership, omission of an express loss-sharing clause is not fatal, and section 13(b) of the Indian Partnership Act, 1932 may be used to ascertain the intended arrangement.

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Issues: Whether a firm can be denied continuation of registration under the Income-tax Act, 1961 merely because the partnership deed does not expressly specify the shares of partners in the losses.

Analysis: The earlier line of decisions treating omission of an express loss-sharing clause as fatal was held no longer good law in view of the Full Bench decision. Where no minor is admitted to the benefits of the partnership, registration cannot be refused on that ground alone. In the absence of contrary indications, the partners are to be taken as having agreed to bear losses in the same proportion in which they share profits. The partnership deed may be read as a whole, along with the accounts and other documents, and recourse may be had to section 13(b) of the Indian Partnership Act, 1932 to ascertain the intended sharing arrangement.

Conclusion: The omission of an express clause regarding loss-sharing does not, by itself, justify refusal of registration or continuation of registration.

Final Conclusion: The reference was not answered on the merits because the governing legal position already stood settled by the Full Bench decision.

Ratio Decidendi: A partnership firm cannot be refused registration merely because the instrument of partnership does not expressly state the partners' shares in losses, if the deed as a whole and the surrounding material indicate the intended sharing arrangement and no contrary indication exists.

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