Instrument of Partnership: a deed must itself create and govern the partnership to permit retrospective registration; mere post period declarations fail.

The article clarifies that an "instrument of partnership" must be a deed that, by its own force, creates a partnership and governs distribution of profits in the relevant accounting period; therefore a deed executed after the accounting year that merely records an earlier verbal agreement or is declaratory cannot confer registration for that prior period. The requirement in the prescribed form that the instrument specify individual shares and govern profit distribution supports this construction, and the operative effect is that post-period partnership deeds lacking present operative force do not entitle the firm to registration for the earlier assessment year.

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Issues: Whether a firm alleged to have come into existence by a verbal agreement during the relevant accounting year, but for which an instrument of partnership was executed only after the end of that accounting year, is entitled to registration under section 26A of the Income-tax Act for the purpose of assessment for that accounting year.

Analysis: The Court examined the meaning of the phrase "constituted under an instrument of partnership" in section 26A read with the prescribed rules and the application form. The Court held that the words "instrument of partnership" connote a deed that operates in the present and into the future to create a partnership and to govern the distribution of profits; thus the instrument must be one by which the firm is created and which governs distribution in the relevant accounting period. The Court considered the grammatical distinction between "under" and "by", the context of section 26A(2) referring to the rules and form, and the requirement in the form that the instrument specify individual shares and that the instrument govern the distribution of profits. The Court also reviewed authorities on the retrospective effect of partnership deeds and concluded that a deed executed after the accounting year cannot, by itself, confer registration for the prior period unless the deed itself creates a partnership operative from its date and governs distribution thereafter; a declaratory or memorandum deed recording an earlier verbal agreement does not meet section 26A's requirement.

Conclusion: The firm was not entitled to registration under section 26A for the assessment year in question because the instrument of partnership was executed only after the relevant accounting year and did not, by its own force, create a partnership operative during that year.

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