Partnership deed interpretation allows registration where profit-sharing shares are clear by implication and surrounding conduct.

A partnership firm was entitled to registration where the deed, read as a whole, disclosed the partners' intended profit-sharing ratio even without express fractional words. The instrument referred to distribution of profits and losses in proportion to respective shares, tied division to an earlier clause, and left unstated matters to the Partnership Act. Equal capital contribution, equal profit entries in the accounts, and the registration form showing a half-and-half ratio supported an inference of equal shares. Specification of shares under the income-tax law was therefore satisfied by the deed and surrounding facts, and refusal of registration was not sustainable.

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Issues: Whether the assessee-firm was entitled to registration when the partnership deed did not expressly state the profit-sharing ratio but, read as a whole with the surrounding circumstances and the partners' conduct, it indicated equal shares.

Analysis: The deed provided that profits and losses were to be distributed in proportion to the respective shares, that the division would be made as mentioned in the earlier clause, and that matters not mentioned in the deed would be governed by the Indian Partnership Act, 1932. The equal capital contribution by both partners, the equal division of profits reflected in the accounts, and the filing of the registration form showing a half-and-half ratio supported the inference of equal shares. The requirement of specification of shares under the applicable income-tax law was satisfied where the deed, read reasonably and in context, disclosed the partners' intention either expressly or by necessary implication. The authorities relied on by the Revenue did not assist it, while the Supreme Court and High Court decisions cited for the assessee supported the view that specification need not always be in fractional words and may be gathered from the instrument and proved surrounding facts.

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

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