Strict compliance for firm registration renewal requires truthful profit distribution under the partnership deed and prescribed certificate.

Renewal of a firm's registration under section 26A required strict compliance with the statutory rules, and the prescribed certificate was a substantive safeguard rather than a formality. Where the application falsely stated that profits had been divided or credited in accordance with the partnership deed, but a substantial part of the profits had in fact not been so dealt with, the renewal conditions were not satisfied. The authorities on internal adjustments, salary, interest, or reserve entries did not apply because those cases involved profits being dealt with consistently with the governing rules. Renewal was therefore properly refused.

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Issues: Whether a firm was entitled to renewal of registration where it had distributed only the book profits according to the partnership deed but had not divided or credited the black-market profits among the partners in accordance with the deed and the prescribed certificate accompanying the renewal application was therefore not true.

Analysis: Registration and renewal under section 26A depended upon strict compliance with the statutory requirements and the prescribed rules. The certificate required by paragraph 3 of rule 6 was not a mere formality but a substantive safeguard because the registered firm itself was not taxable and undistributed profits could escape assessment. Where a substantial portion of the profits earned by the firm had not in fact been divided or credited among the partners as declared, the renewal application did not satisfy the rule. Authorities concerning internal adjustments, salary, interest, or reserve entries were inapplicable because, in those cases, the profits had still been dealt with in a manner consistent with the governing rules.

Conclusion: The firm was not entitled to renewal of registration, and refusal of renewal was justified.

Ratio Decidendi: Renewal of registration of a firm must be refused where the application and certificate required by the rules falsely state that profits have been divided or credited according to the partnership instrument, but a substantial part of the profits has in fact not been so dealt with.

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