Genuine partnership required for tax registration; benamidars do not help where real partnership is not proved.

Registration under section 26A of the Indian Income-tax Act, 1922 depended on proof of a genuine partnership in fact, not merely a deed valid in law. The Court found that reserved control with the original partners, exclusion of the incoming partners from business affairs and accounts, their continuing role as employees, and their lack of knowledge of partnership terms showed they were not real partners. The absence of convincing evidence of profit distribution, together with unauthenticated loose sheets, further undermined genuineness. Benamidars were not an absolute bar to registration, but that principle applied only where the firm was otherwise genuine; on these facts, registration was properly refused.

---

---

Issues: Whether the assessee firm was entitled to registration under section 26A of the Indian Income-tax Act, 1922, in view of the deed of partnership, the alleged absence of a genuine partnership, and the presence of benamidars among the partners.

Analysis: The decisive question was not merely whether the deed created a firm valid in law, but whether a genuine partnership had in fact come into existence for the assessment year in question. The control and management reserved to the original partners, the exclusion of the incoming partners from the affairs and accounts of the business, their close relationship with the original partners, their continued service as employees, and their statements showing lack of knowledge of the partnership terms supported the inference that they were not real partners. The absence of convincing evidence of actual distribution or withdrawal of profits, coupled with the unauthenticated loose sheets relied upon by the assessee, further supported the adverse finding on genuineness. The fact that some partners were benamidars did not by itself bar registration, but that principle applied only where the firm was otherwise genuine.

Conclusion: The refusal of registration was justified because the firm was not shown to be a genuine partnership, and the assessee was not entitled to registration.

---