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TMI Blog1996 (3) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... an, P. K. Narayanan and Co. The assessment years concerned in these income-tax references are 1980-81 to 1982-83. Common questions of law arise for consideration in these references. The questions referred are : " 1. Whether, on the facts and in the circumstances of the case, the firm was entitled to registration under section 185(1)(a) of the Income-tax Act, 1961, for the assessment year 1981-82 ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that forming a partnership by an abkari licensee and exploiting the licence amounts to transfer of licence making the business of the firm illegal ? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that forming a partnership by an abkari licensee and exploiting the licence making the business of the firm illegal ? 4. Whether, on the facts and in the circumstances of the case, the firm was entitled to registration under section 185(1)(a) of the Income-tax Act, 1961, for the assessment years 1980-81, 1981-82 and 1982-83 ? " The two assessees are two different firms. During the accounting period relevant to the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of the parties that one of the partners alone was the licensee to conduct sale of arrack covered by the licence. After obtaining the licence in his individual name, he entered into partnership with others and thereby constituted Narayanan and Co. in relation to the assessment year 1981-82 and K. S. Ramakrishnan, P. K. Narayanan and Co. for the assessment years 1980-81 to 1982-83. The question is whether the licensee was justified in constituting the above partnership firms for carrying on the business of liquor as per the licence granted to one of the partners. Section 15 of the Abkari Act prohibits sale of liquor or intoxicating drugs without licence granted by the Commissioner. It states that no liquor or intoxicating drug shall be sold without a licence from the Commissioner. The provisos to that section are not of any relevance as far as the facts on hand are concerned. Section 24 of the Act, inter alia, provides that every licence or permit granted under the Act shall be subject to such restrictions and on such conditions as the Government may direct either generally or in any particular instance in that behalf. " Such conditions and such restrictions " means, the conditi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not sell or otherwise transfer his contract or licence without the written consent of the Assistant Excise Commissioner. If this prohibition takes within it an embargo on the licensee on entering into a partnership, then the partnership if entered into for exploiting the licence, will be a void one under the Abkari Act and the Rules. Such an agreement, which is contrary to the statutory provision, is void under section 23 of the Contract Act. Such a partnership, which is void as being prohibited by law, cannot be a genuine partnership entitled to get registration under the Income-tax Act, 1961. So, we have to examine the true scope and effect of rule 6(22) of the Rules. Before examining the above aspect, we have to take note of the public policy behind the grant of licence granted by the State for the production, manufacture, possession, transport, purchase and sale of intoxicating liquors. It has been consistently held by courts in this country that no person has a fundamental right to deal or trade in intoxicating liquors and the State is entitled to prohibit or regulate their production, manufacture, possession, transport, purchase and sale. This position has been put beyond a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therwise " should take in only those categories which belong to the same genus as " sale ", " lease " or " sub rent ". It cannot be given any wider ambit. Such an interpretation if resorted to, will certainly go to defeat the intention of the rule-making authority not to allow the licensee to share his privilege with others. A Constitution Bench of the Supreme Court in Lila Vati Bai v. State of Bombay, AIR 1957 SC 521, took the view that the words " or otherwise " should be given the widest possible meaning if so required to give effect to the intention of the Legislature. Their Lordships observed : " The rule of ejusdem generis is intended to be applied where general words have been used following particular and specific words of the same nature on the established rule of construction that the Legislature presumed to use the general words in a restricted sense, that is to say, as belonging to the same genus as the particular and specific words. Such a restricted meaning has to be given to words of general import only where the context of the whole scheme of legislation requires it. But where the context and the object and mischief of the enactment do not require such restricted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he transferor is reduced to the extent to which he shares the interest with others. The original owner may not be losing his rights altogether. But, what he enjoys after the transfer is an abridged right which is less than the full right which he had. When the licensee enters into a partnership with others, even if there is no sale of his rights to the partners, during the subsistence of the partnership, the licensee will not be in a position to deal with the licence as his own. His right becomes restricted to the share of profits which may fall to his share from time to time. In Addanki Narayanappa v. Bhaskara Krishnappa, AIR 1966 SC 1300, their Lordships observed : " The whole concept of partnership is to embark upon a joint venture and for that purpose to bring in as capital money or even property including immovable property. Once that is done whatever is brought in would cease to be the exclusive property of the person who brought it in. It would be the trading asset of the partnership in which all the partners would have interest in proportion to their share in the joint venture of the business of partnership. The person who brought it in would, therefore, not be able to cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntry by the holder of the licence to a partnership, the question whether the partnership was illegal or not, according to their Lordships, did not arise. That decision has no application to the case on hand. The scope and ambit of rule 6(22) of the Kerala Rules being, as we stated earlier, the decision in Jer and Co. v. CIT [1971] 79 ITR 546 (SC), cannot be an authority for the proposition that a licensee can enter into a partnership for exploiting the licence. In CIT v. Union Tobacco Co. [1961] 41 ITR 115, a Bench of this court took the view that a licensee by entering into a partnership passes substantial interest in what he has in favour of another and thereby does what the rule seeks to forbid without permission. The statement of the law, according to us, is correct and we approve the same. The said view taken by the Division Bench is in tune with the decision of the Full Bench of this court in Krishna Menon v. Narayana Ayyar [1961] KLT 620 ; AIR 1962 Ker 21. In view of what has been stated above, we answer all the questions referred in the negative, i.e., against the assessee and in favour of the Revenue. As observed by their Lordships in Bihari Lal Jaiswal v. CIT [1996] 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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