Genuine partnership test governs firm registration; suspicion alone cannot justify refusal without material showing a sham deed.

Registration of a firm under the Agricultural Income-tax Act cannot be refused merely on suspicion or isolated discrepancies; the authority must have material showing that the partnership deed does not reflect the real relationship between the parties. The decisive test is whether the parties genuinely intended to create a partnership, assessed from the totality of relevant facts under the Partnership Act. An unexplained age-related doubt or a discrepancy about stamp paper purchase, without evidence that the deed was a cloak for another arrangement or that the parties' conduct was inconsistent with partnership, is insufficient to deny registration. On the stated facts, the refusal of registration was held unjustified.

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Issues: Whether the Agricultural Income-tax Officer was justified in refusing registration of the firm under section 27(1) of the Agricultural Income-tax Act, 1950, on the ground that the partnership deed was not genuine and that no real partnership existed.

Analysis: Registration under the Act requires a valid application and compliance with the prescribed formalities, but the taxing authority may refuse registration if the deed does not reflect the real state of affairs. The decisive question is whether the parties ly intended to create the relationship of partners, as the existence of a firm depends on the real relation between the parties shown by all relevant facts taken together under section 6 of the Indian Partnership Act, 1932. Mere suspicion, conjecture about the age of a partner, or an unexplained discrepancy regarding the purchase of stamp paper, without material showing that the deed was only a cloak and that the conduct of the parties was inconsistent with a partnership, is insufficient to reject registration.

Conclusion: The refusal of registration was not justified. The question was answered in the negative, in favour of the assessee and against the department.

Ratio Decidendi: Registration of a firm cannot be denied merely on conjecture or isolated suspicious circumstances; it may be refused only when material shows that, despite the deed, the parties did not intend to create a real partnership and the document is merely a cloak for a different arrangement.

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