Discretionary renewal of partnership registration may be refused when profits are not truly distributed under the partnership deed.

Renewal of partnership-firm registration was not treated as an automatic entitlement where the governing rule was discretionary and required a truthful certificate that profits had been divided or credited according to the partnership deed. Because part of the profits had not been distributed or shown in accordance with the instrument, the Income-tax Officer could refuse renewal. The objection that the reference was incompetent also failed, since refusal to renew was treated as substance equivalent to refusal to register, and the Tribunal's action under section 33 was sufficient to sustain reference jurisdiction. The authority was therefore entitled to decline renewal on the facts found.

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Issues: (i) Whether renewal of registration of a partnership firm could be refused when a portion of the profits was not distributed or credited among the partners in accordance with the instrument of partnership. (ii) Whether the reference was incompetent because the order refusing renewal was not one passed under section 33 of the Income-tax Act.

Issue (i): Whether renewal of registration of a partnership firm could be refused when a portion of the profits was not distributed or credited among the partners in accordance with the instrument of partnership.

Analysis: Renewal under the relevant rules was not an automatic right. The rule governing renewal used permissive language and vested discretion in the Income-tax Officer, while the application had to be not merely formally complete but supported by a true certificate that the profits were divided or credited according to the partnership shares. An application that concealed part of the profits and did not show distribution of the whole could justify refusal, because the statutory scheme contemplated a genuine and truthful basis for renewal and did not require registration where the certificate was incomplete or incorrect in substance.

Conclusion: The refusal of renewal was justified, and the issue was answered against the assessee.

Issue (ii): Whether the reference was incompetent because the order refusing renewal was not one passed under section 33 of the Income-tax Act.

Analysis: Renewal of registration was treated as registration for a subsequent year, so refusal to renew was in substance a refusal to register. The Tribunal had also purported to act under section 33, which was sufficient for the reference jurisdiction. The objection that the proper remedy lay only under revision was therefore unsustainable.

Conclusion: The preliminary objection failed, and the reference was competent.

Final Conclusion: The assessee had no enforceable right to renewal of registration on the facts found, and the taxing authority was entitled to refuse renewal because part of the profits had not been dealt with in accordance with the partnership deed.

Ratio Decidendi: Where renewal of registration is governed by a rule conferring discretion and requiring a truthful certificate of distribution of profits, the income-tax authority may refuse renewal if a portion of the profits was not distributed or credited in accordance with the partnership instrument.

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