Partnership registration remains valid despite mismatch with family partition shares where the firm deed governs contractual rights.

A genuine partnership formed by contract remains registrable under the income-tax statute even if two partners, who also represented a divided Hindu family, are shown in the deed with shares different from those allotted under the family partition deed. Rights between family members are governed by Hindu law, while rights and liabilities in the firm are governed by partnership law; a partner may act in a personal and representative capacity at the same time. The family partition affects only internal beneficial interests and does not alter the contractual shares stated in the partnership deed for registration purposes. Cancellation of registration on that basis was therefore unjustified.

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Issues: Whether the registration of a genuine partnership could be cancelled under section 33B of the Indian Income-tax Act, 1922, and refused under section 26A, merely because two partners who represented a divided Hindu family were shown in the partnership deed as holding larger shares than those allotted to them under the family partition deed.

Analysis: A partnership is created by contract and its validity and genuineness depend on the partnership deed and the compliance required by the taxing statute. The rights inter se the members of a Hindu joint family are governed by Hindu law, while the rights and liabilities of partners are governed by the law of partnership. A partner may hold a dual position, acting in his personal capacity in the firm and in a representative capacity vis-a -vis the family or other beneficiaries. The partition of the family property affects the internal rights of the family members, but it does not alter the contractual position of the partners in a pre-existing genuine partnership. The shares mentioned in the partnership deed therefore remain effective for registration purposes, even if the beneficial interests among family members are different.

Conclusion: The cancellation of registration was not justified on the ground that the partnership deed did not reflect the family partition shares, and the firm remained registrable under section 26A.

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