Profit-sharing clause sufficient for firm registration where partnership deed is silent on losses under income-tax law.

Registration of a firm under section 26A of the Indian Income-tax Act, 1922 was upheld where the partnership deed specified only the partners' profit shares. The court read the provision with the Partnership Act and treated section 26A as referring to shares in profits, not requiring an express loss-sharing clause. Because section 13(b) implies equal loss-sharing or loss-sharing in the same proportion as profits absent a contrary contract, silence on losses did not invalidate the instrument. The firm was therefore entitled to registration, and the omission of an express term on losses did not defeat compliance with section 26A.

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Issues: Whether a firm was entitled to registration under section 26A of the Indian Income-tax Act, 1922, when the partnership deed specified the partners' shares in profits but was silent on the sharing of losses.

Analysis: Section 26A required a firm to be constituted under an instrument of partnership specifying the individual shares of the partners. Read reasonably and in the context of the Partnership Act, the provision was held to refer to the shares of profits. Under section 13(b) of the Indian Partnership Act, 1932, in the absence of a contract to the contrary, partners share losses equally or in the same proportion as their profit shares. The silence of the deed on losses therefore did not defeat registration, because the law supplied the implied term that losses would be borne in the same proportion as profits.

Conclusion: The firm was entitled to registration, and the absence of an express clause on losses did not bar relief under section 26A.

Final Conclusion: The reference was answered in favour of the assessee on the construction of section 26A, with the profit-sharing clause treated as sufficient compliance where the deed is silent on losses.

Ratio Decidendi: For registration of a firm under section 26A of the Indian Income-tax Act, 1922, it is sufficient if the partnership instrument specifies the individual shares of profits, because in the absence of a contrary contract the shares of losses are implied by law to follow the same proportion.

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