Partnership registration depends on legal existence under partnership law, not fiscal characterisation of receipts; registration upheld.

Arrangement forming a partnership to lease or exploit a commercial asset can constitute carrying on business for purposes of partnership law, and thus qualify as a partnership capable of registration under section 26A; the legal test is existence of a constitutionally valid partnership under the Partnership Act rather than the fiscal characterisation of receipts. The fiscal classification of income as rent or business for assessment is a distinct question and does not negate the legal existence or registration entitlement of a partnership; therefore the partnership is entitled to registration under section 26A.

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Issues: Whether the Tribunal misdirected itself in law in holding that no business was carried on and therefore the partnership was not entitled to registration under section 26A of the Income-tax Act.

Analysis: The question for decision is whether the arrangement constituted a valid partnership capable of registration under section 26A, which depends on the existence of a legally constituted partnership under the Partnership Act and not on the fiscal classification of the receipts. A partnership formed for leasing or exploiting a commercial asset can amount to carrying on business; leasing the whole factory as an entity may still amount to exploitation of a commercial asset such that profits derived therefrom are from business. The characterisation of income as rentible or as business income for assessment under sections 10 or 12 of the Income-tax Act is a distinct fiscal question and does not determine the legal validity of the partnership or its entitlement to registration under section 26A. Absent any provision in the Partnership Act rendering such an arrangement illegal, the existence of a lease does not, by itself, negate carrying on of business for the purposes of partnership registration.

Conclusion: The Tribunal was misdirected; the answer to the referred question is in the affirmative and the partnership is entitled to registration under section 26A of the Income-tax Act.

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