Partnership by agreement upheld where managerial control was reserved to one partner, making the firm separately assessable.

An agreement admitting the wife as a partner was treated as a valid partnership and firm under the Indian Contract Act and the Indian Income Tax Act. The husband's reservation of management and special powers did not negate the partnership, because partners may lawfully agree that one partner controls the business. The instrument was construed as a real transaction capable of implying a combination of property, labour, or skill, and its terms were not inconsistent with a partnership relation. The arrangement was therefore assessable separately as an unregistered firm under the Super-tax Act, and the reference was answered in favour of the Revenue.

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Issues: Whether the agreement dated 29 June 1916 constituted a partnership and a firm within the meaning of the Indian Contract Act and the Indian Income Tax Act, so as to render the business assessable separately as an unregistered firm under the Super-tax Act.

Analysis: The agreement expressly admitted the wife as a partner. The reservation of management and special powers to the husband did not ate partnership, since partners may validly agree that one partner shall control the conduct of the business. The document was treated as a real transaction, and nothing in its terms excluded an implied agreement to combine property, labour, or skill. The rules governing partnership were held not to defeat the arrangement where the contract showed a partnership by fair construction, and the reserved powers were not inconsistent with a partnership relation.

Conclusion: The agreement constituted a partnership and a firm within the meaning of the relevant statutes, and the answer to the reference was in the affirmative in favour of the Revenue.

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