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Issues: Registration of a firm under section 26A of the Indian Income-tax Act, 1922.
Analysis: The judgment pertains to a reference under section 66(1) of the Indian Income-tax Act, 1922, regarding the registration of an assessee-firm known as Messrs. R. S. Nikhera Construction Co. The firm, consisting of 8 partners, filed an application for registration under section 26A for the assessment year 1958-59. The Income-tax Officer initially refused registration, stating that the individual shares of the partners were not specifically mentioned in the partnership deed. However, the Appellate Tribunal disagreed, citing the partnership deed's implication that the partners' shares were equal. The Tribunal referred the question to the High Court for opinion. The High Court analyzed the partnership deed and relevant legal precedents. It noted that section 26A requires the "individual shares of the partners" to be specified in the instrument, which can be implied, not necessarily express. The deed in question divided partners into three groups with equal profit-sharing ratios. The department had already assessed each partner accordingly, indicating equal profit-sharing. Citing Parekh Wadilal Jivanbhai v. Commissioner of Income-tax, the court emphasized that implied specification suffices for registration. The court distinguished previous Supreme Court decisions like Dulichand Laxminarayan, N. T. Patel & Co., and Mandyala Govindu & Co., which were inapplicable to the current case. In each case, specific circumstances warranted different outcomes regarding registration requirements. The court highlighted the importance of reading the partnership deed as a whole to ascertain partners' shares, as established in legal precedents. Ultimately, the High Court ruled in favor of the assessee, holding that the Tribunal's decision to grant registration was justified under section 26A. The court emphasized that all partners had signed the registration application, and the deed implied equal profit-sharing among partners. The judgment favored the assessee, and no costs were awarded due to the absence of the assessee during proceedings.
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