Firm registration under income tax law fails where the alleged partner is not real and no valid partnership exists.

Registration under rule 6A of the Income-tax Rules, 1922 depended on proof that an existing firm in law was in fact constituted. The Tribunal accepted that the alleged partner had not contributed capital and was not a real partner; on that finding, the supposed firm lacked the minimum two distinct persons required for a valid partnership. A benami characterisation of the alleged partner did not cure the defect, because there was no legal partnership capable of registration or renewal under section 26A.

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Issues: Whether a firm was entitled to registration and renewal of registration under section 26A of the Income-tax Act, 1922, where the Tribunal found that one alleged partner was not in fact a partner and the firm was not in existence.

Analysis: Registration under rule 6A of the Income-tax Rules, 1922, could be granted only if a firm in existence was proved. The Tribunal's finding that the alleged partner had not contributed capital and was not a real partner was accepted. On that footing, the supposed firm could not be treated as a partnership in law, because a partnership requires at least two distinct persons. The suggested characterisation of the alleged partner as a benamidar did not assist the assessee, since on the facts found there was no legal partnership capable of registration.

Conclusion: The question was answered in the affirmative, against the assessee and in favour of the department.

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