Minor attaining majority under partnership deed did not change firm's constitution; fresh deed and denial of renewal were unjustified.

A partnership deed may validly allow a minor admitted to the benefits of the firm to elect, on attaining majority, to become a full-fledged partner without creating a new partnership. Where the deed so provides and the former minor continues on the same profit-sharing basis, the only legal change is exposure to losses as a partner. On these facts, the firm's constitution is not altered, so a fresh deed is not required and renewal of registration cannot be denied on that ground. The cancellation of renewal was therefore unsustainable, and continuation of registration was upheld.

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Issues: Whether the attainment of majority by a minor admitted to the benefits of a partnership, followed by election to become a full-fledged partner under the existing deed, brought about a change in the constitution of the firm requiring a fresh deed and denial of renewal of registration.

Analysis: The partnership deed itself contemplated that the minors admitted to the benefits of the firm could elect to become full-fledged partners on attaining majority. One minor exercised that option and continued in the firm on the same profit-sharing basis, the only consequence being liability to share losses as a partner. On these facts, the event did not create a new partnership or alter the constitution of the firm; it only altered the manner of sharing losses. The view that a fresh partnership deed was necessary was therefore unsustainable.

Conclusion: The issue was decided in favour of the assessee. The firm was entitled to continuation of registration and the Commissioner's order cancelling renewal was set aside.

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