1. This reference under section 66(1) of the Indian Income Tax Act, 1922, to be hereinafter referred to as the "Act" was made at the instance of the assessee. The question of law referred for the opinion of this court is :

"Whether, on the facts and in the circumstances of the case, the assessee is entitled to registration under section 26A of the Income Tax Act for the assessment year 1961-62 ?"

2. The assesses firm was constituted under a deed of partnership dated November 14, 1955. It consists of three partners, namely, R. S. Satyanarayanappa, R. S. Chandrasekharappa and R. S. Venugopal. It is provided in the partnership deed that the profits earned by the firm shall be distributed in the following manner :

(1) Reserve fund, one anna in a rupee.

(2) Satyanarayanappa, six annas in a rupee.

(3) Chandrasekharappa, six annas in a rupee.

(4) Venugopal, three annas in a rupee.

3. The deed is silent as to the manner of distribution of losses among the partners. The firm was granted registration under section 26A of the Act for the assessment year 1960-61. But, when it applied for renewal of its registration for the assessment year 1961-62, the same was refused by the Income Tax