Partnership deed must specify loss sharing among adult partners; a later non-genuine supplementary deed cannot cure the defect in registration.

A partnership deed must provide an ascertainable allocation of losses among the adult partners where minors are admitted only to the benefits of partnership, because minors cannot be made liable for losses. A supplementary deed produced only after a show-cause notice and found to be non-genuine could not cure the defect in the original deed for the relevant assessment years. On that basis, the defect was treated as going to the root of the firm's entitlement to registration, and cancellation of registration with withdrawal of renewal under section 186(1) was upheld.

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Issues: Whether cancellation of registration and withdrawal of renewal under section 186(1) of the Income-tax Act, 1961 was justified where the original partnership deed did not specify the adult partners' shares in losses, minors were admitted only to the benefits of partnership, and the alleged supplementary deed was found not to be genuine.

Analysis: The partnership deed required an ascertainable allocation of losses among the adult partners, especially because minors admitted to the benefits of partnership could not be made liable for losses under the law governing partnership. The asserted supplementary deed, produced only after issuance of the show-cause notice, was treated as a back-dated and non-genuine document and therefore could not cure the defect in the original deed for the relevant assessment years. In such circumstances, the defect went to the root of the firm's entitlement to registration, and the authorities were justified in proceeding under section 186(1). The earlier grant of registration and renewal could not be sustained merely on the basis of a subsequently produced instrument lacking credibility.

Conclusion: The cancellation of registration and withdrawal of renewal were upheld, and the assessee-firm was not entitled to the benefit of registration for the assessment year 1973-74 and the subsequent years.

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