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TMI Blog1997 (4) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... 1, on July 10, 1980. The Income-tax Officer refused to renew the registration on the ground that the licence to vend liquor had been obtained only in the name of Shri P. C. Anand and he had entered into partnership with others in the assessee-firm. The Income-tax Officer gave the following reasons for refusing the continuation of registration : " (a) The right of a licence is a right in person which authorised the licensee to do the thing for which it has been granted. The licence granted to Shri P. C. Anand is not assignable. (b) In the licence there is no transfer of interest. (c) If other person who illegally shares the licence does some illegal act, the licensee has no right to sue strangers in his own name. (d) The Himachal Pra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer had nowhere held that the non-licence-holder partners have indulged in the purchase and sale of liquor in any way. The matter was taken on appeal to the Tribunal. The Tribunal simply followed its earlier judgment in Jagdish Rai Monga [1981] 14 TLR 856 and dismissed the appeal. Thereafter, the question was referred by the Tribunal at the instance of the Commissioner of Income-tax to this court. The position with regard to the partnership in the business of purchase and sale of liquor when the licence has been obtained by one of the partners has been considered in several cases. It is enough if we refer to the judgment of the Supreme Court in Jer and Co. v. CIT [1971] 79 ITR 546. The appellant in that case was a firm with two partne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or, forms a partnership to run the liquor business, such a partnership would be entitled to registration, provided it fulfils the other conditions stipulated in section 185 of the Income-tax Act. The court pointed out that the partnership agreement did not violate any public policy or offend the provisions of section 23 of the Indian Contract Act. The main reasoning is that there was no prohibition in the rules or the conditions of the licence against the constitution of a partnership. The above judgment of the Andhra Pradesh High Court as well as the judgment of the Supreme Court in Jer and Co. [1971] 79 ITR 546, came up for consideration before the Supreme Court again in Bihari Lal Jaiswal v. CIT [1996] 217 ITR 746. After referring to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw. One arm of law cannot be utilised to defeat the other arm of law. Doing so would be opposed to public policy and bring the law into ridicule. It would be wrong to think that while acting under the Income-tax Act, the Income-tax Officer need not look to the law governing the partnership which is seeking registration. It would probably have been a different matter if the Income-tax Act had specifically provided that the registration can be granted notwithstanding that the partnership is violative of any other law---but it does not say so. " The learned Advocate-General has drawn our attention to the order of the Supreme Court in CIT v. B. Posetty and Co. [1996] 220 ITR 216. In that case another Division Bench had occasion to refer to Bi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng will not affect the position in this case. As pointed out already the necessary factual findings have not been arrived at by the Income-tax Officer. In the absence of such finding, it is not open to this court to presume an illegality. It is too well-settled that there is no presumption of illegality. In this case there is an additional factor that the firm had been granted registration earlier and they have applied for renewal of registration in Form No. 12. The wording of section 184(7) of the Income-tax Act is mandatory in terms and it contemplates registration to have effect for every subsequent year provided the two conditions mentioned therein are satisfied. In this case there is no dispute that the two conditions mentioned in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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