Mere co-ownership and rent collection do not create a partnership without a real business activity for tax registration.

Co-owners of partitioned joint-family property do not constitute a partnership merely because they agree to share rent and one member manages the properties. A valid partnership requires an agreement, a real business activity, and agency between the parties; the substance of the arrangement, not its label, is decisive. Where the arrangement is limited to collecting rent from partitioned properties and no genuine business is carried on, the group is not treated as a partnership for income-tax registration. On the facts stated, the assessee was not carrying on business and was not entitled to registration under section 26A of the Income-tax Act, 1922.

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Issues: Whether the assessee, consisting of members of a joint Hindu family who had partitioned properties and entered into a partnership deed for collecting rent and managing the properties, could be said to be carrying on business, and consequently whether it was entitled to registration under section 26A of the Income-tax Act, 1922.

Analysis: A partnership requires an agreement, the existence of a business, and the element of agency. Mere co-ownership of property, even if the owners agree to share profits and one of them manages the property for the others, does not by itself amount to a partnership. The decisive inquiry is whether there is a real common business being carried on by one or more persons acting for all, and that conclusion must be gathered from the substance of the arrangement and the surrounding facts, not from the form of the deed or the labels used by the parties. On the facts found, the activity was only collection of rent from partitioned properties, without any real business activity.

Conclusion: The assessee was not carrying on business and was not entitled to registration under section 26A.

Ratio Decidendi: Co-owners of property become partners only if their dealings amount to the carrying on of a real business; mere division of income from property and its management for collection of rent does not constitute a partnership for income-tax registration.

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