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Issues:
1. Whether a partner obtaining a license and conducting business on behalf of a partnership firm constitutes a transfer of privilege to the firm? 2. Whether the partnership firm is entitled to be treated as a registered firm under the Income-tax Act? Analysis: 1. The case involved a partnership firm engaged in the arrack business where licenses for certain shops were held by individual partners. The deed of partnership allowed auctions taken by any partner to be treated as auctions taken by the firm. The court considered the partnership agreement and the nature of the business conducted. It referred to the Full Bench decision in Narayanan and Co. v. CIT, which held that partnerships formed for dealing in liquor are prohibited under section 23 of the Contract Act due to public policy concerns. The court also cited the apex court's decision in Bihari Lal Jaiswal v. CIT, emphasizing that partnerships involving intoxicating liquors are closely regulated and allowing outsiders to participate could undermine public interest. Consequently, the court found the partnership in question to be violative of section 23 of the Contract Act, rendering it void for income tax purposes. 2. The court addressed the issue of registration under the Income-tax Act for the partnership firm. It noted the apex court's decision in CIT v. B. Posetty and Co., which raised questions about sub-partnerships and their entitlement to registration benefits. The court referred to an earlier ruling in CIT (Addl.) v. Degaon Ganga Reddy G. Ramakrishna and Co., establishing that sub-partnerships are distinct entities. Despite the discussion on sub-partnerships, the court clarified that the current case did not involve such arrangements. It reiterated that the Full Bench decision and the principles outlined in Bihari Lal Jaiswal's case applied to the partnership firm in question. Therefore, the court ruled against the partnership firm's entitlement to registration benefits under the Income-tax Act. In conclusion, the court answered both issues in the negative, favoring the Revenue and ruling against the partnership firm. The judgment, along with the seal and signature of the Registrar, will be forwarded to the Income-tax Appellate Tribunal, Cochin Bench, as required by law.
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