Partnership deed and section 26A registration accepted despite prior oral agreement, with effect from the deed date

A partnership deed executed for registration under section 26A was treated as sufficient to constitute the firm under an instrument from the date of the deed, even though it recited an earlier oral partnership on the same terms. The court rejected a strict literal reading that would deny registration merely because the firm had first existed by oral agreement, and gave effect to the statutory object of allowing registration where the partnership shares are specified. The deed could not operate retrospectively for assessment purposes, but it was effective prospectively from its execution, so registration was allowed in favour of the assessee.

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Issues: Whether a firm that first came into existence by oral agreement can be treated as constituted under an instrument of partnership for the purpose of registration under section 26A of the Income-tax Act when the deed executed later recites that the partnership had previously existed on the same terms.

Analysis: The expression "constituted under an instrument" was understood to mean a firm created or formed by a formal deed. However, the fact that the partners recited a prior oral arrangement on the same terms did not justify denying registration once the partnership terms had been embodied in a written instrument. The instrument could not operate retrospectively for assessment purposes, but it could govern the firm from the date of the deed. The statutory object of permitting registration where the partnership shares are specified was treated as controlling, and a harsh literal construction was rejected.

Conclusion: The firm was entitled to registration under section 26A, and the question was answered in the affirmative, in favour of the assessee.

Ratio Decidendi: A partnership deed executed for registration under section 26A is sufficient to constitute the firm under the instrument from the date of the deed, even if the deed recites an earlier oral partnership on the same terms.

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