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Refusal of registration to the firm under section 26A for assessment years 1958-59 to 1960-61. Analysis: The case involved a partnership deed executed by four partners for a retail handloom cloth business. The Appellate Assistant Commissioner refused registration due to restrictions on the powers of partners, which were deemed to reduce them to mere dummies. However, the Income Tax Appellate Tribunal did not find these restrictions sufficient for refusal. The Tribunal also noted that partners 3 and 4 were paid amounts exceeding their specified profit shares, which was not provided for in the partnership deed. This discrepancy led to the refusal of registration by the Tribunal. Under Section 26A of the Income Tax Act, the procedure for firm registration is outlined. The application must specify individual partners' shares and be accompanied by the original partnership deed. The officer, upon receipt, must ensure the firm exists as per the partnership instrument and may grant registration accordingly. The Tribunal's refusal was based on incorrect profit calculations due to partners receiving additional payments beyond their profit shares. However, this discrepancy should not be a ground for refusal if the firm exists as per the partnership deed and the application is properly made. In conclusion, the High Court held in favor of the assessee, stating that the incorrect calculation of profits due to partners receiving extra payments should not be a reason for refusal of registration. As long as the firm exists as per the partnership deed and the application is in order, registration should be granted. The court emphasized that partners performing employee duties does not impact the registration process. Thus, the question was answered in favor of the assessee, with costs awarded.
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