Partnership recognition under Indian Partnership principles upheld, resulting in registrability under section 26A and relief to the assessee.

Whether a firm under a 1944 partnership deed was registrable under section 26A of the Income-tax Act turned on application of the Partnership Act concept: partnership is contractual, transfer or charge of a partner's interest does not create a partner, and introduction of a new partner requires unanimous consent; a subsequent deed that did not bind the original co partner created at most a sub partnership and did not alter the original partnership. Applying those principles, the tribunal finding of a genuine original partnership is supported, and the firm under the 15 September 1944 deed was held registrable for the assessment years in question in favour of the assessee.

---

---

Issues: Whether the firm constituted under the deed of partnership dated 15th September, 1944, was registrable under section 26A of the Income-tax Act, 1922 for the assessment years 1945-46, 1946-47, 1947-48 and 1948-49.

Analysis: Section 2(6B) of the Income-tax Act adopts the partnership concept of the Indian Partnership Act, 1932. Under section 5 of the Indian Partnership Act a partnership arises from contract; section 29(1) provides that transfer or charge of a partner's interest does not make the transferee a partner of the firm; and section 31(1) requires consent of all existing partners for introduction of a new partner. The second deed (23rd November, 1945) did not include or bind the original co-partner and therefore created at most a sub-partnership between Ratilal Manishankar Dave and the five other persons, without affecting the original partnership between Renu Bala Devi and Ratilal Manishankar Dave. Authorities cited on different factual matrices (e.g., where internal constituent partners were not disclosed or where an ostensible simulant arrangement existed) are distinguishable. The tribunal's finding that the 15th September, 1944 deed constituted a genuine partnership is supported by these legal principles and the absence of privity between the original partner and the parties to the later deed.

Conclusion: The firm constituted under the deed dated 15th September, 1944, was registrable under section 26A of the Income-tax Act, 1922 for the assessment years 1945-46, 1946-47, 1947-48 and 1948-49; decision is in favour of the assessee.

---