Partnership registration cannot be refused merely for partner salary payments when deed and procedural requirements are satisfied.

Registration of a firm under section 26A of the Income-tax Act, 1922 depends on the firm being constituted by an instrument of partnership specifying the partners' individual shares and on compliance with the prescribed application procedure. Where those statutory requirements are met, registration cannot be refused merely because some partners received salary or because profits were later distributed in an internal manner different from the profit-sharing clause. The Income-tax Officer may decline registration only if he is not satisfied that the firm existed as shown in the instrument or that the application was properly made. Refusal of registration was therefore not justified.

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Issues: Whether registration of the firm could be refused under section 26A of the Income-tax Act, 1922, merely because certain payments were made to partners by way of salary despite the partnership deed specifying their profit shares.

Analysis: Section 26A and the relevant rules require that the firm must be constituted under an instrument of partnership specifying the individual shares of the partners and that the application must be made in the prescribed form with the partnership deed. Once these requirements are satisfied, the Income-tax Officer may refuse registration only if he is not satisfied that a firm existed as shown in the instrument or that the application was properly made. A supposed irregularity in the internal distribution of profits, or payment of salary to some partners, is not by itself a ground for rejecting registration where the partnership deed and procedural requirements are otherwise complied with.

Conclusion: Refusal of registration was not justified. The question was answered in favour of the assessee.

Ratio Decidendi: Registration under section 26A cannot be denied on the basis of the manner in which profits are subsequently appropriated, unless the statutory requirements regarding the existence of the firm and compliance with the prescribed application procedure are not satisfied.

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