Genuineness of partnership deed must rest on evidence, not suspicion, when deciding refusal of registration.

A partnership deed does not by itself prove a genuine partnership for income-tax purposes; the authorities may examine whether it was meant to regulate real rights and liabilities or was merely a pretence. A finding that the firm was not genuine must rest on relevant material and cannot be based on suspicion, irrelevant circumstances, or an inference no reasonable person could draw. On the facts discussed, the partner's lack of business knowledge was consistent with a dormant role, non-withdrawal of profits did not negate partnership, and the deed's execution circumstances did not support a sham inference. Refusal of registration under section 26A was therefore unjustified.

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Issues: Whether there was any evidence to support the Tribunal's finding that the partnership was not genuine and whether refusal of registration under section 26A was justified.

Analysis: A partnership deed does not by itself conclusively establish genuineness, and the income-tax authorities may examine whether it was intended to govern the parties' rights and liabilities or was merely a pretence. However, a finding that a partnership is not genuine must rest on relevant material and cannot be based on suspicion, irrelevant considerations, or a view of facts that could not reasonably be entertained. The material relied upon by the Tribunal was insufficient: the partner's ignorance of business details was consistent with his being a dormant partner, his failure to withdraw profits did not prove absence of partnership, and the circumstances in which the deed was executed did not support an inference of sham.

Conclusion: There was no evidence to support the finding that the partnership was not genuine, and refusal to register the firm under section 26A was unjustified.

Ratio Decidendi: A finding that a partnership is not genuine is unsustainable unless supported by relevant evidence; suspicion, irrelevant factors, or unreasonable inferences cannot justify refusal of registration.

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