Profit-sharing deed silent on losses still supports firm registration where partnership law presumes loss-sharing in the same ratio.

A partnership deed that specifies unequal profit-sharing ratios but is silent on losses does not, by itself, bar registration under sections 184 and 185 of the Income-tax Act. In the absence of an express contrary agreement, section 13(b) of the Indian Partnership Act raises a presumption that losses are shared in the same proportion as profits. The later rectification deed and return schedule were treated as clarifying the original arrangement, not creating a new one. On that basis, the refusal of registration was based on an incorrect view of law and was not sustainable.

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Issues: Whether the assessee-firm was entitled to registration under sections 184 and 185 of the Income-tax Act when the partnership deed was silent about sharing of losses, and whether the statutory presumption under section 13(b) of the Indian Partnership Act could be applied.

Analysis: In the absence of an express agreement to the contrary, the presumption under section 13(b) of the Indian Partnership Act is that partners who share profits in definite proportions also share losses in the same proportions. The partnership deed disclosed unequal profit shares, and the later rectification deed and the return schedule were treated as clarifying the original understanding rather than creating a new arrangement. The refusal of registration was therefore based on an incorrect view of the law.

Conclusion: The assessee-firm was entitled to registration and the denial of registration was not sustainable.

Ratio Decidendi: Where a partnership deed specifies profit-sharing ratios but is silent on losses, section 13(b) of the Indian Partnership Act raises a presumption that losses are also to be shared in the same ratio, enabling registration of the firm under sections 184 and 185 of the Income-tax Act if no contrary agreement is shown.

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