Partnership registration turns on actual contracting partners, not family status or profit-sharing arrangements

For partnership registration purposes, only persons who actually enter the partnership contract are counted as partners. A Hindu undivided family cannot be treated as a partner merely because a coparcener signs as karta, returns income in that status, or shares profits with family members. A nomination clause that substitutes a successor on a partner's death also does not bring the heirs into the firm as partners. On the stated facts, the partnership deeds showed no clear excess over the statutory partner limit, and the Revenue did not prove any infringement of that prohibition; the firm was therefore entitled to registration.

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Issues: Whether the assessee-firm was entitled to registration for the assessment years in question, notwithstanding the Revenue's contention that the number of partners exceeded the statutory limit because some partners allegedly represented Hindu undivided families or because successors were nominated under the partnership deed.

Analysis: The relevant deeds of partnership showed no clear indication that any partner had entered the firm as karta of a Hindu undivided family. Under the settled legal position, a Hindu undivided family cannot, as such, be a partner; the contracting partner is the individual coparcener, even if he later shares his profits with family members. The mere fact that a partner's income was returned in the status of a Hindu undivided family, or that profits were shared within the family, did not convert the firm into a partnership with the family unit. Likewise, the nomination of successors on the death of a partner only substituted the new individual partner and did not add the heirs as partners. The deeds consistently showed 20 or fewer partners, and the Revenue failed to prove any infringement of the prohibition against a partnership exceeding the statutory limit.

Conclusion: The assessee-firm was entitled to registration. The finding that the partners were acting on behalf of their Hindu undivided families was incorrect, and the statutory prohibition was not attracted.

Ratio Decidendi: For the purpose of partnership registration, only those persons who actually enter into the partnership contract are counted as partners; a Hindu undivided family does not become a partner merely because a coparcener is its karta or because profits are shared with family members.

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