Partnership deed restrictions do not void a partnership where profit sharing and mutual agency still exist.

A partnership deed restricting senior partners' control over management, accounts, capital contribution, and withdrawals did not make the firm void in law. The HC treated the arrangement as a matter of substance and held that a partnership can still exist where partners contractually limit implied authority, so long as there is an agreement to share profits of a business carried on by all or any acting for all. Sharing of profits and losses strongly supported partnership, and the restrictions were consistent with a valid partnership rather than a mere employment arrangement. The firm was therefore entitled to registration under section 26A.

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Issues: Whether restrictions in a partnership deed, including control by senior partners over management, accounts, capital contribution, and limited withdrawal rights of one partner, rendered the partnership void in law so as to disentitle the firm to registration under section 26A of the Income-tax Act.

Analysis: The arrangement was examined as a matter of substance and not mere form. A partnership may exist even where the property used for the business is not jointly owned by all partners, one partner has limited managerial authority, or the powers of a partner are curtailed by contract. Under the Partnership Act, partners may by agreement extend or restrict implied authority, and the real test remains whether there is an agreement to share profits of a business carried on by all or any acting for all. Sharing of both profits and losses raises a strong presumption of partnership, which is not displaced merely because one partner is a working partner, is subject to directions, or has limited rights over accounts and withdrawals. The restrictions in the deed were held to be compatible with a valid partnership and distinguishable from cases where the alleged partner had no real share or the relationship was merely a cloak for employment.

Conclusion: The restrictions did not make the partnership void in law, and the firm was entitled to registration.

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