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TMI Blog1984 (10) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the circumstances of the case, the Tribunal is justified in holding that on account of violation by the partners of the firm of sub-rule (4) of r. 63 of the Rajasthan Excise Rules, 1956, a firm valid in law has not come into existence in view of the provisions of section 23 of the Indian Contract Act, 1872, and that, therefore, the benefit of continuation of registration could not be allowed to it in respect of the assessment year 1968-69 ? 4. Whether, on the facts and in the circumstances of the case, the Tribunal is justified in holding that the excise licence obtained in respect of the financial year 1968-69 corresponding to the assessment year 1969-70 was obtained by a fraudulent representation by the two major partners and the minor partner of the firm and that any agreement entered into with a view to share the gains of such a contract would be void, even though the minor had become major during the course of the year and new partnership deed has been executed on October 29, 1968, on the minor attaining majority ? 5. If the answer to the aforesaid question is in the affirmative, whether the Tribunal is justified in holding that the benefit of registration could not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at partnership deed runs as under : " This deed of partnership made this 29th day of October in the year of Christ one thousand nine hundred sixty-eight between Malu Khan s/o. Mehtab Khan, aged 43 years, resident of Bikaner, party hereto of the FIRST PART, Mohamdu Khan s/o Chimankhan, aged 44 years, resident of Bikaner, party hereto of the SECOND PART and Lalu Khan s/o Hussain Khan, aged 19 years, resident of Bikaner, party hereto of the THIRD PART, whereas the parties hereto of the FIRST AND SECOND parts along with the party hereto of the third part as minor being admitted to the benefits of partnership were carrying on a partnership business tinder the name and style of M/s. Malu Khan Lalu Khan under an instrument of partnership dated October 18, 1966, whereas the party hereto of the third part, namely, Shri Lalu Khan, has become major and has opted to continue as partner in the said firm from August 2, 1968, when he attained the age of majority, the parties hereto have been carrying on the said business in partnership with all existing liabilities, assets and rights in partnership and whereas to avoid future differences, the parties hereto have agreed to reduce the terms of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pinion that the firm formed by the persons to secure wine contract, which they were not legally entitled to, is invalid as well as no genuine. He, therefore, cancelled the registration granted in respect of the assessment year 1966-67 and also cancelled the benefit of continuation of registration granted regarding the assessment year 1967-68. When the question of continuation of registration for the assessment year 1968-69 came up, the Income-tax Officer refused to extend the facility of registration to the firm on the ground that in the earlier years, the registration had been cancelled and, therefore, according to the Income-tax Officer, he could not grant the renewal of registration to the assessee-firm in respect of the assessment year 1968-69. The registration application for the assessment year 1969-70 filed in Form No. 11A was also rejected and registration was refused to the firm by the Income-tax Officer for the same reasons as given by him in his order under section 186 of the Act for the assessment year 1966-67. An appeal was taken by the assessee and the Appellate Assistant Commissioner by his order, annexure 1, dated February 13, 1974, negatived the assessee's claim fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en reasons for cancelling the registration of the assessee-firm for the assessment year 1966-67. It appears that the Income-tax Officer made a reference to the District Excise Officer, Bikaner, for clarification regarding the age of Lalu Khan, the partner of the assessee-firm. Vide letter dated December 1, 1971, he intimated the following particulars S. No. Name of the bidder or Name of the person Year Age of tenderer with country who deposited Financial year person liquor shop Security (1) (2) (3) (4) (5) 1. 1. Alaksagar with other In group as in col. 1966-67 Not avail- five shops No. 2 Rs. 98, 560 able. 1 . Malu Khan 2. Suleman 3. Malu Khan 4. Rukandeen 5. Bhurankhan 6. Mangilal 7. Lalu Khan 8. Gordhandass 9. Mohamdu Hussain Transferred shop Alaksagar in the name of Shri 1. Malu Khan 2. Lalu Khan with the security amount of Rs. 24,300, vide this office order No. 267 to 274 dated I/26-4-66 2. 1. Malu Khan 1. Malu Khan 1967-68 Not avail 2. Lalu Khan 2. Lalu Khan able. 3. Manamudukhan Rs. 26,415 (Shop Alaksagar) 3. 1. Malu Khan 1. Malu Khan 1968-69 35, 20, 50 2. Lalu Khan 2. Lalu Khan 3. Manamudu Khan Rs. 21,080 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void. " It will be useful here to excerpt Illustration (e) given below this section : " (e) A, B and C enter into an agreement for the division among them of gains acquired, or to be acquired, by them by fraud. The agreement is void, as its object is unlawful." Had Lalu khan not been represented by his father or other partners as major, the licence could not have been obtained by the three partners including the minor because rule 63(4) of the Excise Rules provides that a person who is below the age of 18 years shall not be entitled to bid at auctions. This representation regarding Lalu Khan that he is a major though he was a minor was fraudulent as this was with a view to obtain the licence. In our opinion, Illustration (e) to section 23 of the Contract Act provides a complete answer and, as such, the agreement is void. Apart from that, under section 33 of the Act, the authority granting licence requires execution of a counterpart agreement in conformity with the tenor of the licence. A contract with minor is void as he is incompetent to contract. The T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar that a partnership is the result of a contract between the partners. Section 11 of the Contract Act provides that every person is competent to contract who is of the age of majority according to the law to which he is subject and who is of sound mind and is not disqualified from contracting by any law to which he is subject. It is correct that Lalu Khan being a minor could be admitted to the benefits of the partnership but in view of rule 63(4) of the Excise Rules, the firm of which Lalu Khan was represented as a major, he being a minor, could not bid at the auctions. It is well settled that contracts violating the provisions of the Excise Act or the Rules made thereunder are illegal within section 23 of the Contract Act. There are a catena of cases of the various High Courts on the point. The Income-tax Officer was right when he held that the firm formed by the persons to secure liquor licence was invalid as the firm was not entitled to obtain liquor licence as Lalu Khan was a minor at the relevant time. In these circumstances, the firm formed for obtaining the liquor licences for 1967-68 cannot be said to be valid firm within the meaning of section 186(1) of the Act and the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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