A draft deed of partnership, which is undated, unsigned, and does not create or record any rights or liabilities, does not constitute an instrument of partnership within the meaning of S. 26A of the Indian Income Tax Act, 1922.

V. S. DESAI J. -On a requisition by the High Court under s. 66 (2) of the Indian Income -tax Act, 1922, the Income -tax Appellate Tribunal has drawn up a statement of the case referring the following question which it was directed to refer :

"Whether on the facts and in the circumstances of the case, was the Tribunal justified in holding that the application for registration was rightly rejected by the Income -tax authorities on the ground that there was no instrument of partnership?"

2. The question arises out of the proceedings relating to the assessment of the assessee for the assessment year 1950 -51, for which the relevant accounting year was the year ended on December 31, 1949. The business of the assessee was of exporting raw wool procured in Rajasthan to England and America. It also owned a factory for ginning and pressing wool, an ice factory and a flour mill at a place in the erstwhile Indian State of Palanpur. The States in which the assessee was carrying on its business merged in the Indian Union, and from August I, 1949, the Indian Income -tax Act, 1922, became applicable to the area. For the purpose of the assessment of the assessee for the year 1950 -51, it applied for registration under S. 26A of the Indian Income -tax Act, on February 20, 1953. That application was signed by two persons as the partners of the assessee -firm, namely, Mohanbhai Devjibhai Hiraji and R. M. Dave. The partnership was alleged to have come into existence from January 1, 1946. The Income -tax Officer came to the conclusion that Dave was not a partner of the alleged partnership firm, because there was no regular deed of partnership; secondly, the Bank declarations of three banks showed that Dave was not a partner; and there were also certain other documents which showed that Dave was only a manager. The Income -tax Officer, therefore, refused registration. In the appeal to the Appellate Assistant Commissioner, he held that Dave was associated with the partnership and there was evidence showing that he was a working partner. He, however, held that there was no Instrument of partnership under which the assessee -firm was constituted within the meaning of s. 26A of the Act, and the Income -tax Officer, therefore, was right in refusing registration. In the second appeal before the Tribunal, the Tribunal confirmed the decision of the Departmental authorities, holding that the partnership was not constituted under an instrument of partnership within the provisions of s. 26A of the Act.

3. Admittedly no properly executed partnership deed was produced before the Income -tax Officer. What was produced before him was an alleged draft of the partnership deed which was said to have been written up late in 1949. The assessees case was that Mohanbhai Devjibhai, one of the partners, had gone to Pakistan and was unable to return to India for reasons of health. When the Indian Income -tax Act became applicable in August 1949, the partners wanted to have a deed of partnership executed. A draft was accordingly prepared which was taken by the other partner Dave to Pakistan, where it was shown to Mohanbhai Devjibhai, and was approved of by him. It was also agreed to between the partners that the regular deed of partnership should be executed in India on the return to India of Mohanbhai. Mohanbhai, however, could not return to India, and the draft therefore remained un -executed. In addition to this document, the assessee also relied on certain other documents, which were: an order of the Custodian of Evacuee Property, Bombay, passed on September 30, 1950, relating to the right, title and interest of Mohanbhai Devjibhai in the wool ginning and pressing factory, the ice factory and the flour mill, etc. In this order, it was observed by the Custodian that there was evidence to support the view that Dave wall accepted as a working partner by Mohanbhai for a period up to 1956 with eight annas share in the profits. The next document was a