Partnership constitution unchanged by salary paid to existing partners, preserving renewal of registration under tax law.

Payment of salary to existing partners, without an express deed clause, did not by itself amount to a change in the constitution of the firm for renewal of registration under section 26A of the Indian Income-tax Act, 1922. The expression "constitution of a firm" was treated as referring to the firm's composition or structure, which ordinarily changes only when partners are added or removed. An improper remuneration payment may breach the partnership arrangement and section 13 of the Indian Partnership Act, 1932, but it does not alter the profit-sharing arrangement or the firm's constitution unless the underlying partnership structure itself changes. Renewal remained available on that basis.

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Issues: Whether payment of salary to two partners, in the absence of an express clause in the partnership deed, amounted to a change in the constitution of the firm so as to disentitle the assessee-firm to renewal of registration under section 26A of the Indian Income-tax Act, 1922.

Analysis: The expression "constitution of a firm" was construed according to its plain meaning as referring to the composition or structure of the partnership, which ordinarily changes when partners are added or removed. A mere variation in the manner in which profits are distributed, or the payment of remuneration to partners, does not by itself alter the constitution of the firm. The payment of salary contrary to the deed was treated as a breach of the partnership arrangement and of section 13 of the Indian Partnership Act, 1932, but not as an alteration in the proportion in which profits were to be shared unless additional material showed that the profit-sharing arrangement itself had changed. The registration rules were read as requiring the constitution shown in the deed to remain unchanged, but not as treating every improper remuneration payment as a change in constitution.

Conclusion: The payment of salary to the partners did not change the constitution of the firm, and the assessee-firm remained entitled to renewal of registration under section 26A of the Indian Income-tax Act, 1922.

Ratio Decidendi: For renewal of registration of a partnership firm, a change in constitution requires a change in the partners composing the firm, not merely an improper payment of salary or commission to existing partners.

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