Partnership registration cannot be refused when the deed validly allocates profits and excludes a minor from personal loss liability.

A partnership firm constituted by written deed was entitled to registration where the deed specified the partners' shares and lawfully admitted a minor only to the benefits of partnership. The Income-tax authorities could examine whether a genuine firm existed and whether the application met the prescribed requirements, but registration could not be refused merely because profits of one business and losses of another were separately allocated. Read as a whole, the deed authorised the minor to receive profits without personal liability for losses, and that arrangement was consistent with section 30(2) of the Partnership Act. The refusal of registration was therefore unjustified.

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Issues: Whether the refusal of registration to the assessee-firm for the assessment years 1960-61 to 1962-63 was justified on the ground that the profits and losses were not divided in accordance with the shares specified in the partnership deed.

Analysis: The firm was constituted by a written instrument specifying the partners' shares, and a minor was admitted only to the benefits of partnership. The registration machinery under section 26A of the Indian Income-tax Act, 1922 and the relevant rules was directed to ascertain whether a genuine firm existed and whether the application conformed to the prescribed requirements. The deed, read as a whole, permitted the minor to share profits without personal liability for losses, and clause 6 was construed to mean that where one business resulted in profit and the other in loss, the minor was entitled to her share of the profits while not being burdened with the losses. The arrangement was held to be consistent with section 30(2) of the Indian Partnership Act and the actual division of profits and losses was not found to violate the deed.

Conclusion: The refusal of registration was unjustified and the assessee-firm was entitled to registration for the assessment years in question.

Ratio Decidendi: Where a partnership deed validly specifies the shares of the partners and lawfully excludes a minor admitted to the benefits of partnership from personal liability for losses, registration cannot be refused merely because profits of one business and losses of another are separately appropriated if the deed, properly construed, authorises that method of allocation.

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