Profit-sharing ratios imply corresponding loss-sharing in partnership deeds, so separate loss clauses are not essential for registration.

For registration of a firm under the Income-tax Act, 1922, an instrument of partnership need not expressly state the partners' shares in losses if it specifies their profit-sharing ratios. The governing principle applied was that, absent a contract to the contrary, loss-sharing follows the same proportion as profit-sharing. On that construction, refusal of registration solely because losses were not separately mentioned was unjustified, and the issue was answered in favour of the assessee.

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Issues: Whether, for registration of a firm under the Income-tax Act, 1922, the instrument of partnership must expressly specify the shares of the partners in losses, in addition to their shares in profits.

Analysis: The instrument of partnership had specified the partners' shares in profits, but not in losses. The controlling principle applied was that, in the absence of a contract to the contrary, a specification of profit-sharing ratios carries with it a corresponding sharing of losses in the same proportion. On that construction, refusal of registration merely because losses were not separately mentioned was not justified.

Conclusion: The requirement of an express specification of loss-sharing shares was not necessary for registration. The question was answered in favour of the assessee.

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