Firm constituted by written instrument: registration effective from the instrument date despite prior oral partnership, allowing prospective effect.

Section 26A registration requires a firm to be constituted under a written instrument; where partners execute and present a partnership instrument specifying shares with the registration application, the firm may be treated as constituted under that instrument from its date even if the deed recites an earlier oral partnership. The written instrument cannot be given retrospective effect to alter prior assessment liabilities, but its recital of prior oral dealings does not bar registration or prospective legal effect; registration should not be denied solely because the deed alleges prior oral existence.

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Issues: Whether a firm which originally came into existence by an oral agreement is entitled to be registered under Section 26A if, on the date of application for registration, the terms and conditions of the partnership have been reduced to writing and the application is accompanied by such an instrument of partnership.

Analysis: Section 26A requires that a firm to be registered must be "constituted under an instrument of partnership"; historically the registration regime treats the firm (not merely the instrument) as the subject of registration. A firm may be constituted by different modes (oral agreement, conduct, or written instrument), but the statutory phrase denotes a firm constituted by the written instrument itself. Where partners execute and present an instrument specifying individual shares, the instrument may be treated as constituting the firm as from the date of that instrument even though the deed alleges prior partnership. The instrument cannot have retrospective effect to alter assessment liabilities for past accounting periods, but the law does not require denial of registration for future effect merely because the instrument recites prior oral partnership. The Court distinguished earlier authorities dealing with retrospective effect and held that registration should not be denied solely because the partnership deed alleges prior existence; where the terms are embodied in a deed and presented for registration, the firm may be treated as constituted under that instrument from its date.

Conclusion: The question is answered in the affirmative - where an instrument of partnership specifying partners' shares is presented with an application for registration, the firm may be registered and treated as constituted under the instrument as from the date of the instrument, even though the instrument alleges a prior oral partnership. The result is in favour of the assessee.

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