Partnership validity depends on mutual agency and profit sharing; internal management arrangements do not by themselves defeat registration.

A valid partnership exists where the deed shows an agreement to carry on business and share profits, with mutual agency remaining the essential element under the Partnership Act. Exclusive management by one partner, unequal profit division, or exclusion from a particular branch of activity does not by itself negate partnership if the arrangement still reflects common business conduct. On the deed examined, the partners maintained common management, common accounts, and agreed sharing of profits and losses; the absence of a share in the lorry business and lack of capital contribution by one partner were treated as internal arrangements. The partnership was therefore regarded as valid, and registration was available.

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Issues: Whether, on interpretation of the partnership deed dated 20 May 1967, a valid partnership came into existence and the assessee was entitled to registration.

Analysis: The governing test under Section 4 of the Partnership Act is whether there is an agreement to share the profits of a business carried on by all or any of the partners acting for all. Exclusive management in one partner, unequal division of profits, or exclusion of one partner from a particular branch of activity does not by itself negate partnership, so long as the essential element of mutual agency remains. The deed showed a common partnership arrangement, common management of the business, preparation of common accounts, and agreed distribution of profits and losses as between the partners. The fact that one partner had no share in the lorry-owning business and did not contribute capital was held to be a matter of internal arrangement and not destructive of the partnership.

Conclusion: A valid partnership existed and the assessee was entitled to registration.

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