Firm registration under Section 26A requires grant where prescribed application and deed comply; payments alone don't justify refusal.

Refusal to register a firm under Section 26A was unjustified where the prescribed application and the original partnership instrument were filed in compliance with Rules 3 and 4; upon satisfaction that the firm exists as constituted and the application is properly made, the proper officer must grant registration. Variations between deeded profit shares and payments characterised as salary or remuneration, without a finding that no firm existed or that the application was improper, did not negate the firm's existence or provide a valid ground for refusal, and registration must be granted.

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Issues: Whether the refusal to grant registration to the firm under Section 26A of the Income-tax Act for the assessment years 1958-59 to 1960-61 was justified.

Analysis: Section 26A and the prescribed rules require an application in the prescribed form accompanied by the original instrument of partnership and its copy; upon satisfaction that a firm existed as constituted by the instrument and the application was properly made the proper officer must grant registration, otherwise he may refuse recognition. The factual finding was that the application and instrument were filed in the prescribed manner in compliance with Rule 3 and Rule 4 of the Income-tax Rules, 1922. The Income Tax Appellate Tribunal's refusal rested on variations between the deeded profit shares and payments made to two partners characterized as salary; there was no finding that no firm existed or that the application was improperly made. The payments which reduced net profits or represented remuneration for duties performed did not, without more, negate the existence of the firm constituted by the instrument or provide a valid ground under the rules for refusal of registration.

Conclusion: The refusal to grant registration under Section 26A is not justified; registration must be granted.

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