Severability in partnership deeds preserves income-tax registration where an unlawful object is separable from lawful business activities.

A partnership deed that included lawful trades as well as an unlawful wine-selling object under U.P. excise rules was discussed for registration purposes under section 26A of the Income-tax Act, 1922. The unlawful object was treated as defeating the excise law only to that extent, because the deed also covered separate lawful businesses and the accounts reflected independent trading in those lawful departments. Applying severability, the illegal wine object did not void the deed as a whole, and the firm could still be recognised as existing under the validly severable arrangement for income-tax registration.

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Issues: Whether the assessee-firm was entitled to registration under section 26A of the Income-tax Act, 1922, where one object of the partnership was to carry on an unlawful wine business but the partnership also covered lawful trades.

Analysis: The partnership deed showed that the firm was intended to carry on business in stores, provisions, packed medicines and wines. Under the relevant U.P. Excise Rules, a firm of three partners could not validly obtain a joint licence for the sale of wines, so the object of carrying on the wine business in the name of the firm was unlawful because it would defeat the excise law. However, the deed also covered lawful activities, and the accounts showed separate trading in the lawful departments. Applying the doctrine of severability, the unlawful object relating to wines could be separated from the lawful objects relating to the other businesses. The deed was therefore not void in its entirety, and a firm in existence as constituted by the instrument could still be recognised for registration purposes.

Conclusion: The assessee was entitled to registration under section 26A because the partnership deed was valid to the extent of the lawful businesses and the firm was in existence under that validly severable arrangement.

Final Conclusion: The reference was answered in favour of the assessee, and the firm's entitlement to registration was upheld.

Ratio Decidendi: Where a partnership deed contains both lawful and unlawful objects, the unlawful part does not vitiate the entire deed if the illegal object is severable from the lawful objects; in such a case, the firm may still be treated as existing for registration under the income-tax law.

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