Genuineness of partnership turns on evidence, not suspicion, where accepted facts do not support a sham inference.

Where the Tribunal's accepted facts show that the partners contributed capital as stated, the books were not false, and the business was managed by one partner, a finding that the partnership was not genuine cannot rest on relationship evidence or suspicion alone. An inference that the wife and brother-in-law were acting under a sham arrangement, based only on non-withdrawal or partial use of profits, was treated as unsupported by proper material. On those facts, the issue was not a pure question of fact but raised a question of law under the income-tax reference provision concerning whether the firm was registrable as a genuine partnership.

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Issues: Whether, on the facts found by the Tribunal, there was material to support the conclusion that the partnership constituted by the deed dated 16 November 1949 was not genuine and, therefore, not registrable under section 26A of the Indian Income-tax Act, 1922.

Analysis: The Tribunal had accepted that the partners contributed capital in the manner stated in the deed, that the books of account were not false, and that the brother-in-law managed the business. Its conclusion rested mainly on the relationship between the parties and on the inference that the wife and brother-in-law must have been acting under a suspect arrangement because the wife did not withdraw profits and the brother-in-law did not spend his share fully. On those findings, the conclusion that the partnership was not genuine was held to be unsupported by proper material and to rest on suspicion and surmise rather than on a reasonable inference from the facts.

Conclusion: A question of law did arise under section 66(2) of the Indian Income-tax Act, 1922, and the Tribunal's finding that the firm was not genuine could not stand as a proper factual inference.

Ratio Decidendi: Where the factual findings accepted by the Tribunal do not reasonably support an inference that a partnership is sham or not genuine, the issue ceases to be a pure question of fact and a question of law arises under section 66(2) of the Indian Income-tax Act, 1922.

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