Partnership Validity confirmed where ledger entries and separate banking conduct corroborate genuineness, enabling tax registration under law.

Dispute over whether a deed dated 10 April 1947 created a genuine partnership and whether the firm qualified for registration under section 26A of the Income-tax Act, 1922 for AY 1948-49 is analysed by reference to the partnership deed, Bali Khata ledger entries, bank and shop accounts, and excise licence records. The article explains that ledger entries and separate banking conduct corroborated capital contribution and profit allocation, absence of evidence of licence transfer defeated the excise-based objection, and prior Hindu undivided family status did not bar later formation; authorities' surmise was insufficient, so registration was warranted.

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Issues: Whether the alleged partnership constituted by the deed dated 10 April 1947 was a genuine partnership and whether the firm is entitled to registration under section 26A of the Income-tax Act, 1922 for the assessment year 1948-49.

Analysis: The Court examined the partnership deed (including its retrospective commencement clause), the existence and contents of the Bali Khata showing capital accounts, drawings and profit allocations, the conduct and maintenance of bank accounts, and the asserted conflict with excise licensing. The Tribunal and income-tax authorities relied on factors such as retrospective effect of the deed, absence of separate capital accounts in head-office books, prior continuation of assessment as a Hindu undivided family, and non-disclosure to excise authorities. The Court found that the Bali Khata entries corroborated capital and profit division, that maintenance of bank accounts in licensee names and separate shop accounts was consistent with the partnership deed, that no evidence established transfer or subletting of excise licences under section 42(1)(a) of the Bengal Excise Act, 1911, and that the earlier status as a Hindu undivided family did not preclude later disruption and formation of a genuine partnership. The Court held that the authorities' conclusion rested on surmise and suspicion and that there was insufficient material to deny registration.

Conclusion: The Court allowed the appeal and held that the firm is a genuine partnership and shall be registered under section 26A of the Income-tax Act, 1922 for the assessment year 1948-49; the decision is in favour of the assessee.

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