Deeming provision for joint families requires counting adult coparceners toward the partner limit, so registration was denied.

Section 4(3) operates as a statutory deeming rule: when two or more joint Hindu families form a partnership, the adult members of those families (excluding minors) must be counted for the twenty person partner limit under section 4(2) of the Indian Companies Act, 1913, and that counting suffices to render the partnership unregistered and invalid for the limited purpose of registration. The practical effect is refusal of registration under section 26A of the Income tax Act, 1922 where the deemed partner count exceeds the statutory ceiling, without converting family members into full legal partners for other purposes.

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Issues: Whether, on the facts and circumstances of the case, registration under section 26A of the Income-tax Act, 1922 was rightly refused because the firm contravened section 4 of the Indian Companies Act, 1913 (particularly section 4(2) read with section 4(3)) by effectively consisting of more than twenty persons.

Analysis: The Court examined whether section 4(3) must be read so as to treat the adult members of joint Hindu families as to be counted for the purpose of the twenty-person limit when two or more joint families "form a partnership". The majority considered authorities recognizing that a karta entering a partnership does not ipso facto make all coparceners partners in law, but held that section 4(3) creates a limited statutory deeming rule for the purpose of computing partner strength under the Companies Act. The majority concluded that section 4(3) departs from the common-law position by requiring adult members of joint families to be reckoned for the restricted purpose of determining whether registration is required, while not converting those members into legal partners for other purposes; minors are to be excluded as specified. The dissenting judge analysed the term "partnership" in statute in its legal sense and read section 4(3) as referring only to partnerships of individuals drawn from joint families (i.e., where individuals themselves are partners), rejecting a statutory fiction that counts all family members merely because their kartas are partners.

Conclusion: Registration was rightly refused; the partnership exceeded twenty persons for the purposes of section 4(2) read with section 4(3) of the Indian Companies Act, 1913, and the Income-tax Officer was justified in refusing registration under section 26A of the Income-tax Act, 1922.

Ratio Decidendi: For the purpose of section 4(2) of the Indian Companies Act, 1913, section 4(3) operates as a statutory deeming provision: where two or more joint Hindu families "form a partnership" the adult members of those families (excluding minors) are to be counted in determining whether the partnership exceeds twenty persons, and that deeming suffices to render an unregistered partnership invalid under section 4(2) for the limited purpose of registration though it does not confer full legal partner status on those family members under partnership law.

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