Partnership registration and mutual agency remain intact even where partners engage in unlawful speculation, with no referable question of law.

A partnership deed that validly constitutes a firm and establishes mutual agency is not rendered non-genuine merely because the partners carried on an unlawful speculative business. On that factual basis, the Tribunal correctly treated the assessee-firm as entitled to registration and declined to deny it under section 185(1)(b) of the Income-tax Act, 1961. The High Court also held that no referable question of law arose under section 256(2), since the issue turned on the Tribunal's factual findings rather than any legal error. The Revenue's challenge therefore failed, and the firm's registration remained undisturbed.

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Issues: Whether the Tribunal was justified in holding that the assessee-firm was entitled to registration despite the partners carrying on an unlawful speculative business, and whether any question of law arose for reference under section 256(2) of the Income-tax Act, 1961.

Analysis: The Tribunal had found that the partnership was constituted by a valid deed and that the essential element of mutual agency was present. The mere fact that the partners engaged in speculation in gur and shakkar, an activity said to be unlawful, did not by itself render the firm non-genuine or disentitle it to registration. On that factual foundation, no referable question of law was made out for the High Court under the reference provisions.

Conclusion: The Tribunal was right in treating the firm as lawfully constituted and in refusing registration denial under section 185(1)(b) of the Income-tax Act, 1961. No question of law arose for reference, and the Revenue's petition under section 256(2) failed.

Final Conclusion: The refusal to call for a reference was upheld and the Revenue's challenge was rejected, leaving the assessee-firm's registration undisturbed.

Ratio Decidendi: An unlawful activity carried on by partners does not, by itself, make a partnership non-genuine where the deed establishes a lawful constitution and the element of mutual agency exists; in such a case, no referable question of law arises merely on that basis.

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