A partnership deed may be disregarded if it does not reflect the genuine relationship between parties as per the surrounding circumstances.

1The Judgment of the Court was delivered by Govindan Nair, C. J.- A common question arises in these references in relation to the assessment to Agricultural Income Tax for the years 1966-67, 1967-68, 1968-69 and 1969-70 of one Sri T. V. Mathew. The Agricultural Income Tax Appellate Tribunal, Trivandrum, has formulated the question in the following terms:
"Whether on the facts and in the circumstances of the case, the Agricultural Income Tax Officer is justified in refusing to grant registration under S.27 of the A.I.T. Act 1950 to the firm. T. V. Mathew and Sons on the ground that the partnership deed is not genuine."

2 The partnership deed referred to in the question is dated 7th December 1964 and is at page 17 of the paper book. This partnership deed, it is said, is an agreement entered between T. V. Mathew and his sons, T. M. Rajan and T. M. Mathew to carry on the business of the firm. The business of the firm it is stated in paragraph 2 of the partnership deed "shall be agriculture or of any other nature as may hereinafter be agreed upon by the partners." The said T. V. Mathew owned about 15 acres of land and the capital contribution of the said T. V. Mathew, the first partner, consisted, according to the partnership deed of all the lands owned by him. The second partner's contribution is said to be Rs. 1,000 and the third partner's, a like amount. The profits of the f am were to be divided equally between, the partners and the losses were also to be borne equally. An application was made as envisaged by S.27(1) of the Agricultural Income Tax Act, 1950, for short the Act, for registration of the firm for the purpose of the assessment for the year 1966-67. This application was not allowed; registration was refused and the assessment for that year as well as the two following years have been made on the said T. V. Mathew as if there was no partnership in existence taking the entire income from the properties as the income of the said T. V. Mathew.

3 The view taken by the Agricultural Income Tax Officer has been upheld by the Appellate Assistant Commissioner in appeal by the assessee and reaffirmed by the Tribunal by its order which is at page 11 of the paper book. It was contended before the Tribunal by the assessee that there is no justification for refusing registration of the firm. This contention was not accepted by the Tribunal for three reasons. The Tribunal noticed that the partnership deed is dated 7th December 1964 but the stamp paper on which the deed was drawn up was purchased only on 8th December 1964 (vide paragraph 4 of the order). The Tribunal also observed in the same paragraph that the age of the 3rd partner T. M. Mathew had not been specified in the deed and "it is not known whether he was a major at the time of execution of the deed". Regarding the contribution of the share capital, the Tribunal observed thus in paragraph 6 of the order.
"6. As stated above the capital of the partnership consists of the entire land from which the agricultural income is derived and Rs. 1,000 each provided as contribution by the two sons. As stated earlier there is no evidence of the cash contribution by the sons. Even supposing that they have contributed Rs. 1,000 each, their contribution is extremely negligible when compared with the value of the land, but all the three partners are eligible for equal shares which is illogical. Of course there can be partners in a firm who have not made any contribution towards the capital, and the sharing of the profits need not necessarily be in the proportion of the contribution towards capital, provided there exist justifying circumstances for the same. Here at least one of the two sons is a non resident, taking no active part in the cultivation. Yet he is also to get an equal share with the appellant, who owns the entire lands yielding the income and is conducting the cultivation, just for an amount of Rs. 1,000 contributed by aim (if he has actually contributed it). This docs not appeal