Benami partner does not by itself invalidate a genuine partnership or bar registration under income-tax law.

A partnership is not rendered nongenuine for registration under section 26A of the Indian Income-tax Act, 1922 merely because one partner is shown as a nominee or benamidar of another. Where the deed specifies the partners' shares, the firm carries on business in accordance with the instrument, and the other statutory requirements are met, registration cannot be refused on that ground alone. A benamidar remains a real partner vis-a -vis the firm and the other partners; any beneficial ownership of another person is only an internal arrangement and does not by itself affect the legal existence of the partnership.

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Issues: Whether registration of the firm could be refused on the ground that the partner shown in the deed was only a nominee or benamidar of his father and, if so, whether such benami character made the partnership nongenuine for purposes of registration under section 26A of the Indian Income-tax Act, 1922.

Analysis: The evidence showed that the reconstituted firm was constituted by an instrument specifying the partners' shares, carried on business in accordance with the deed, and complied with the other statutory requirements for registration. The mere circumstance that one partner was found to be a nominee or benamidar of another did not, by itself, destroy the legal existence or genuineness of the firm. A benamidar remains a real partner vis-a -vis the other partners and the firm; any beneficial interest of the real owner is only an internal arrangement and does not affect the partnership as constituted. Registration can be refused only if the partnership is not genuine or if the instrument does not correctly specify the individual shares.

Conclusion: The refusal to register the firm was not justified merely because one partner was the benamidar of another; the partnership remained genuine and entitled to registration.

Ratio Decidendi: The benami or nominee character of a partner does not, by itself, invalidate a genuine partnership or bar registration under section 26A of the Indian Income-tax Act, 1922, where the partnership deed otherwise satisfies the statutory conditions.

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