Partnership validity turns on profit sharing and agency, not on whether one partner holds dominant control.

A partnership deed is legally effective where it provides for sharing of profits and losses and authorises one partner to carry on the business on behalf of all, even if that partner has predominant managerial control. Concentration of control in one partner does not, by itself, negate the element of agency or convert the relationship into master and servant. If the deed is not shown to be a mere cloak, the firm retains legal recognition as a partnership and registration cannot be denied on that basis.

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Issues: Whether the applicant-firm was rightly refused registration under section 26A of the Indian Income-tax Act, 1922, on the ground that the partnership deed did not create a genuine partnership in law.

Analysis: The decisive test was whether the deed satisfied the essential requirements of partnership under section 4 of the Indian Partnership Act, 1932, namely, an agreement to share profits and losses and carrying on of the business by all the partners or any of them acting for all. Although wide managerial and proprietary powers were reserved to one partner, the deed still provided for sharing of profits and losses and authorized that partner to carry on the business on behalf of all. The mere concentration of control in one partner did not destroy the element of agency or convert the relationship into one of master and servant. On the facts, the deed was not shown to be a mere cloak and the partnership could not be denied legal recognition merely because one partner retained dominant powers.

Conclusion: The firm satisfied the legal requirements of a partnership and was entitled to registration under section 26A.

Ratio Decidendi: A partnership remains valid in law, and registration cannot be refused, where the deed provides for sharing of profits and losses and business is carried on by one or more partners acting for all, even if one partner is given predominant managerial control.

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