Genuine partnership registration cannot be refused merely because one partner is alleged to be a name-lender or benamidar.

A genuine partnership registered by instrument specifying the partners' shares could not be denied renewal under section 26A of the Indian Income-tax Act, 1922 merely because one partner was alleged to be a name-lender or benamidar. The Tribunal had found the firm to be genuine and the partnership deed consistent with the Partnership Act and income-tax rules, so the tax authorities' refusal on the theory of a tax-avoidance device could not stand on those facts. Registration may be refused only where the partnership itself is sham or illusory, and that basis was not established in the reference. The Tribunal was therefore justified in directing renewal of registration.

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Issues: Whether renewal of registration of the firm could be refused under section 26A of the Indian Income-tax Act, 1922, on the footing that one partner was a name-lender or benamidar, and whether the Tribunal was justified in holding that renewal had been wrongly refused for the assessment years in question.

Analysis: The firm was constituted by an instrument of partnership specifying the shares of the partners, and the Tribunal found that the partnership was genuine and that the partnership deed and the legal relationship between the partners were not inconsistent with the Partnership Act or the relevant income-tax rules. The refusal by the tax authorities rested on the view that one partner was merely a name-lender and that the arrangement was a device to reduce tax liability. The Court held that a distinction between a name-lender and a benamidar could not, by itself, justify refusal of registration where the Tribunal had found the firm to be genuine. The Court further held that, although registration may be refused where the partnership itself is sham or illusory and the deed is executed as a pretence to escape tax, that factual basis had not been raised in a manner that permitted interference in the reference.

Conclusion: Renewal of registration could not be refused on the facts found, and the Tribunal was justified in directing renewal of registration.

Final Conclusion: The reference was answered in favour of the assessee, with the firm entitled to renewal of registration for the years in question.

Ratio Decidendi: Where the Tribunal finds that a partnership firm is genuine and the instrument of partnership is valid, registration cannot be denied merely because one partner is alleged to be a name-lender or benamidar; refusal is justified only where the partnership itself is shown to be sham or illusory.

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