Partnership formation fails where mutual agency and profit-sharing are absent, barring registration under the Income-tax Act.

A partnership in law requires both an agreement to share profits and a mutual agency relationship under which the business is carried on by all or any partners for all. The partnership deed here allowed the father to exclude one or both sons from management, or to place management with another person, so an excluded son had no right of agency in the business. It also left to the father whether profits would be shared at all, when they would be shared, and to what extent, which negatived any real agreement to share profits. On the deed itself, no partnership in law was formed and registration under section 26A was rightly refused.

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Issues: Whether, on a true construction of the partnership deed, a partnership in law was formed between the father and his two sons so as to entitle registration under section 26A of the Income-tax Act, 1922.

Analysis: A valid partnership requires agreement to share profits and the element of agency, namely that the business is carried on by all or any of the partners for all. The deed gave the father power to exclude one or both sons from management or to entrust management to another person, so that an excluded son had no right to act as an agent of the business. It also left to the father the decision whether profits were to be shared at all, when they were to be shared, and to what extent, which negatived any real agreement to share profits. On the terms of the instrument itself, the arrangement did not create a partnership in law, so the question of subsequent conduct was irrelevant.

Conclusion: No partnership in law was formed under the deed, and registration under section 26A was rightly refused.

Ratio Decidendi: A partnership in law exists only where there is an agreement to share profits and a mutual agency relationship; if the deed negates either element, the arrangement cannot be treated as a partnership for registration purposes.

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