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TMI Blog1959 (12) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... s should be owned by the partners in four equal shares; one share to be held by a group consisting of three partners; another by a group comprising of two; the third by another group of two partners; and the fourth share by five partners. Paragraph 4 of the deed also provides that the profits or losses of the partnership should be divided among the 12 partners in the manner mentioned therein. Paragraph 8 states that the closing stocks of tobacco, beedi leaves, etc., held by the partners on 31-12-1124 should be taken over by the firm's head office either as outright purchase or for commission sales; and the cost of such goods be credited in the accounts of the partners who held them. The other relevant provisions of the partnership deed are that the daily collections of each shop are to be sent to the head office on the same day, or thrice a week; are to be credited to the respective shops; and certain persons are to manage and to attend full time to the firm's business. The details concerning the shops and which partner held what licence can best be described by giving the following extract from paragraph 4 of the statement of case to this court: Shop Class of licence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B class licensees as provided for under the rules. They may also purchase tobacco from any of the stockist licensees, or from another A class licensees in the State. B class licensees will have the privilege of sale only to consumers and to the C class licensees in accordance with the conditions of such licences. B class licenses should make their purchases of tobacco from A class licensees only. 4. The licensee shall not lease out, sell or otherwise transfer the subject-matter of his contract or licence without the written consent of the Excise Commissioner." To continue with the statement of facts, the application was made to the Income-tax Officer for the registration of the firm under section 26A of the Indian Income-tax Act, 1922, and the officer held that the firm having been constituted in contravention of the excise rules was illegal and should not be registered. The appellate authority has concurred with the view relying on Govindaraj v. Kandaswami A.I.R. 1957 Mad. 186. The Appellate Tribunal, however, has reversed the order and held that the partnership did not amount to infringement of the several provisions of Act 7 of 1084. In the alternative the Tribunal has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her as his partner and the Full Bench held that such a partnership was not void by reason of the covenant not to underlet or assign the lease. The decision in Radhey Shiyam v. Mewa Lal ([1929] I.L.R. 51 All 506) is more helpful to the assessee; for there was an agreement between the licensee and a third person for sharing the profits and losses in the business under the licence and the learned judges held that, though rules 80, 82 and 86 under sections 40 and 41 of the United Provinces Excise Act permitted transfer of licences only with the permission of the Collector, the agreement did not amount to transfer or sub-lease of the liquor contract, and was, therefore, not void. In Karsan v. Shivaji ([1912] I.L.R. 37 Bom. 320) the defendant had obtained a licence under the Bombay Abkari Act to sell country liquor and one of the conditions of the licence was against subleasing without the permission of the Collector. After obtaining the licence the defendant admitted the plaintiff in the case as his partner, who brought the suit for an account of what was due under the partnership, and the learned judges held that under the aforesaid circumstances the partnership was not void. In Abdull ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. The vicarious possession is then substantially different and the rule against transfer is attracted. We therefore think the view of Horwill, J., in Velu Padayachi v. Sivasooriam A.I.R. 1950 Mad. 444, that mere entering into partnership amounts to transfer of licensee's right is correct and the contract to do so is void because such a transfer is prohibited. We further think Umacharan Shaw v. Commissioner of Income-tax [1959] 37 I.T.R. 271 does not overrule this view, for in the case before the Supreme Court the partnership did not create a benefit that had not existed prior to its formation. The case therefore states the proposition that when no benefit is created the rule against transfer is not attracted. The first ground therefore taken to sustain the order by the Appellate Tribunal fails. The counsel for the assessee has next argued that the provision for punishment in section 6 of the Cochin Tobacco Act is with a view to safeguard revenue, and the contract to do what is so punished is not void, and he relies on a formidable number of cases. In Champsey Dossa v. Gordhandas Kessowji ([1917] 40 I.C. 805) the learned judges held that a partnership is not void under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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