Partnership deed must expressly state profit shares for firm registration; prior mistaken registration does not bar refusal of renewal.

Section 26A(1) of the Income-tax Act, 1922 required the partnership deed itself to expressly and definitely specify each partner's share in firm profits. A clause dealing only with capital allocation was insufficient, and profit-sharing could not be implied from the general rule under the Partnership Act. Earlier registration for prior years did not create an absolute bar to refusal of renewal where the statutory requirement was in fact unmet, because the tax authority could correct an erroneous earlier view. On that footing, the deed failed the registration condition and refusal of renewal was justified.

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Issues: Whether the partnership deed specified the individual shares of the partners in the profits of the firm so as to satisfy section 26A(1) of the Income-tax Act, 1922, and whether earlier registration of the firm for prior assessment years precluded refusal of renewal for the relevant year.

Analysis: The expression "specifying the individual shares of the partners" in section 26A(1) was construed to mean an express and definite statement of the partners' shares in the profits of the firm. The relevant provisions of the Income-tax Act and the Partnership Act showed that registration was linked to assessment of firm income according to the partners' profit-sharing ratios. The partnership deed clause dealing with capital merely allotted shares in the capital and did not apportion profits. The clause dealing with profits also did not state the individual shares of the partners. Equality in profit-sharing could not be inferred from the deed by resort to the general rule under the Partnership Act, because section 26A required the deed itself to specify the shares. The earlier grant of registration for prior years did not create an absolute bar, since income-tax authorities were not prevented from correcting an erroneous earlier view when the statutory requirement had in fact not been satisfied.

Conclusion: The deed did not satisfy section 26A(1), and the refusal to renew registration was justified.

Ratio Decidendi: For registration of a firm under section 26A(1), the partnership instrument must expressly and definitely specify the partners' shares in profits, and an erroneous earlier registration does not bar refusal of renewal for a subsequent year where the statutory requirement is absent.

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