The absence of specific allocation of shares implies equal share in the business, and voluntary allocation of assets among partners is a matter of contract.

1. In this case the Income-tax Appellate Tribunal has stated a case on the following question of law under Sec. 66(1) of the Income-tax Act:

"Whether on the facts and in the circumstances of the case the applicant firm was rightly refused registration under Sec.26-A?"

For the assessment year 1956-57 the assessee applied for registration on the strength of a partnership deed dated the 21st of March, 1953. Registration of the firm was refused by the Income-tax Officer and this decision was affirmed by the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal in appeal, prior to the formation of the Partnership the business of the assessee was carried on by an Association of persons consisting of Mohammad Raza and Mohammad Rahamatulah Mohammad Raza died some time before the 1st of April,. 1952. After the death of Mohammad Raza there was a partnership formed between Mohammad Rahamatullah, the widow of Mohammad Raza and the sons of Mohammad Raza and Mohammad Rahamatullah. The entire capital of the association was distributed in the following proportion between the new partners:

As, "1.Mohammad Rahamatullah4

2.Blbi Hakima2

3.Mohammad Fasi2

4.Mohammad Ahmad2

5.Mohammed Aiyub2

6.Mohammad Sayeed2

7.Nazir Ahmad2"

2. On behalf of the assessee learned Counsel put forward the argument that there was no material before the Income-tax appellate Tribunal for holding that there was no valid and genuine deed of partnership in this case. In out opinion, the argument on behalf of the assessee is well founded and must be accepted as correct. The first ground given by the Appellate Tribunal for refusing registration is that in the account books of the assessee there was no determination of the capital of Mohammad Raza and Mohammad Rahamatullah, It was observed in the next place by the Tribunal that no separate capital accounts stood in the books in the nama of Mohammad Raza and Mohammad Rahamtullah and there was no allocation of definite shares between these two brothers. It was also observed by the Tribunal that It could not understand why the undivided shares of that two brothers ware distributed among the alleged partners in the ratio mentioned in the partnership deed. In cur opinion, none of these reasons has any relevant bearing on the question whether the deed of partnership dated the 21st of March, 1953, submitted for registration by the assessee is a valid and genuine document. It is not disputed on behalf of the assesses that there was no specific allocation of shares in the Association of ipersons. But in the absence of any such definite allocation there is the implication of law that each of these persons has equal share in the business, and if by the deed of partnership dated the 21st of March, 1953, Mohammad Rahmatullah chose to forgo 2 annas out of his eight annas share in favour of the family members of Mohammad Raza there is no reason to doubt the validity of the partnership deed. It is a matter of contract between Mohammsd Rahamatullah and the other partners as to how the shares of the, new business are to be allocated between the new partners and if Mohammad Rahamatullah voluntarily gave a portion of his assets in favour of the family members of his brother Mohammad Raza, that is no ground for doubting the validity of the partnership deed. In the second place, the fact that there was no separate capital account of the partners has no relevance to the question whether there was genuine partnership.

In Uma Charan Shaw and Bros. V/s. Commissioner of Income-tax, West Bengal, 1959-37 ITR 271 (SC) the supreme Court held in similar circumstances that there was nothing to establish that the partnership was not genuine, and the circumstance that there was no separate capital account of the partners was not very material. It was observed by the Supreme Court in that case that the finding of the Income-tax Officer that the firm was not genuine was a finding based upon surmise and conjjecture and was not supported by