Hindu undivided family partnership capacity and registration signatures were examined under the contractual form of firm formation.

A Hindu undivided family cannot itself be a partner in a firm because partnership is contractual and can be entered into only by competent persons acting through the karta or adult coparceners; where two coparceners join, their inter se shares must be specified, so the deed was defective on that basis. However, the registration application under the Income-tax Act could not be rejected as signed only by one coparcener when the record showed signatures of both, and the objection failed on the correct facts.

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Issues: (i) Whether a Hindu undivided family as such could be a partner in a firm and whether, in the facts, the partnership deed was invalid for want of specification of the inter se shares of the two coparceners. (ii) Whether the application for registration under the Income-tax Act was invalid because it was treated as having been signed only by one coparcener when the record showed signatures of both.

Issue (i): Whether a Hindu undivided family as such could be a partner in a firm and whether, in the facts, the partnership deed was invalid for want of specification of the inter se shares of the two coparceners.

Analysis: Partnership is a contractual relationship and can be entered into only by persons competent to contract. A joint Hindu family is not a legal person distinct from its members in the same way as a corporation, and it can act only through the karta or adult coparceners. On that footing, it is only the karta or the adult coparceners who can become partners; the family as such cannot be treated as the partner. If two coparceners were to join as representatives of the family, their shares inter se had to be specified, because otherwise the contractual basis of the partnership would remain incomplete.

Conclusion: The Hindu undivided family as such could not be a partner, and the deed was defective for want of specification of the shares of the two coparceners. This issue was decided against the assessee.

Issue (ii): Whether the application for registration under the Income-tax Act was invalid because it was treated as having been signed only by one coparcener when the record showed signatures of both.

Analysis: The original application formed part of the record, and the Court accepted that the document bore the signatures of both coparceners. The Tribunal had proceeded on an incorrect factual assumption that only one had signed. In those circumstances, the application could not be rejected on the ground that it was signed only by one coparcener.

Conclusion: The application for registration was not invalid on the footing adopted by the Tribunal. This issue was decided in favour of the assessee.

Final Conclusion: The reference was answered by upholding the view that the family could not be treated as a partner as such, while correcting the factual error regarding execution of the registration application and treating that objection as unsustainable.

Ratio Decidendi: A Hindu undivided family can act in partnership only through the karta or adult coparceners in their contractual capacity, and a registration application cannot be rejected on a mistaken assumption contrary to the record.

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