Partnership registration requires express loss-sharing shares in the deed; silence on losses defeats registration.

A partnership deed admitting a minor only to the benefits of partnership was not void merely because the minor was not made liable for losses. Under the Indian Partnership Act, 1932, such an arrangement was consistent with a minor's limited position. However, for registration of a firm under section 26A of the Indian Income-tax Act, 1922, the instrument itself had to specify the partners' individual shares in both profits and losses. Silence on loss-sharing could not be cured by implication or by resort to the general rule of partnership law. Registration was therefore refused.

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Issues: (i) Whether the partnership deed was void ab initio on the footing that the minor was made liable for the losses of the firm; (ii) Whether registration under section 26A of the Indian Income-tax Act, 1922 required the partnership instrument to specify the shares of the partners in both profits and losses.

Issue (i): Whether the partnership deed was void ab initio on the footing that the minor was made liable for the losses of the firm.

Analysis: On a true construction of the deed, the minor was admitted only to the benefits of the partnership and was not burdened with liability for losses. The clauses relating to profits and annual accounts did not create any stipulation that the minor, or the major partners, would bear losses in any stated proportion. Under section 30 of the Indian Partnership Act, 1932, a minor may be admitted only to the benefits of partnership, and the instrument here was consistent with that position.

Conclusion: The partnership was not void ab initio, and this objection to registration failed.

Issue (ii): Whether registration under section 26A of the Indian Income-tax Act, 1922 required the partnership instrument to specify the shares of the partners in both profits and losses.

Analysis: Section 26A made registration conditional upon a firm being constituted under an instrument of partnership specifying the individual shares of the partners. The scheme of the Act showed that the Income-tax Officer must know the respective shares for assessment, apportionment of income, and set-off or carry-forward of losses. A deed that stated only the shares in profits, while remaining silent on losses, did not satisfy that requirement. Resort to the general rule in section 13(b) of the Indian Partnership Act, 1932 would amount to supplying an omission in the instrument itself. The contrary view was rejected, and the reasoning that both profits and losses must be specified was accepted as the correct construction of section 26A.

Conclusion: The instrument had to specify the shares of the partners in both profits and losses, and since it did not do so, registration was rightly refused.

Final Conclusion: The reference was answered against the assessee and in favour of the department, holding that the firm was not entitled to registration under section 26A unless the partnership deed specified the partners' shares in both profits and losses.

Ratio Decidendi: For registration of a firm under section 26A of the Indian Income-tax Act, 1922, the partnership instrument must itself expressly specify the individual shares of the partners in both profits and losses; the shares cannot be supplied by implication or by resort to the general law of partnership.

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