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TMI Blog1980 (7) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... d to continuation of registration ? The facts briefly stated are that one Shantilal Mehta, who was taking liquor contracts for some years, was assessed to income-tax in the status of an individual. Contracts for the sale of foreign liquor at two places, i. e., Durg and Bhilai, for the period from 1st August, 1967, to 31st March, 1968, were auctioned on 24th July, 1967, and Shantilal was the highest bidder. On 1st August, 1967, Shantilal informed the Collector of Excise, through the District Excise Officer, that he took the contracts in his name on behalf of a partnership consisting of five members and that the contracts will be executed by the partnership. The licences were issued on 4th August, 1967, in the name of Shantilal. A partnership deed was executed in respect of the said contracts on 1st September, 1967. Shantilal wrote another letter on 4th September, 1967, to the Collector, stating therein that he was enclosing a copy of the partnership deed and that the Collector may do the needful in the matter. These applications remained pending with the Collector and no orders were passed on them. In the meantime, the liquor licences issued in the name of Shantilal were renewed y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment year 1973-74 the ITO treated the status of the assessee as an unregistered firm. The AAC, in appeal, by order dated 4th May, 1976, directed the ITO to grant renewal of registration in view of the order of the Tribunal dated 19th August, 1975. The Department went up in appeal to the Tribunal which was dismissed on 19th August, 1977. On applications made by the Department, the questions of law set out above by us have been referred by the Tribunal. Section 17 of the Madhya Pradesh Excise Act, 1915, provides that no intoxicant shall be sold except under the authority and subject to the terms and conditions of the licence granted in that behalf ". Sub-section (1) of s. 62 of the Act empowers the State Government to make rules for the purpose of carrying out the provisions of the Act. Clause (h) of subs. (2) of s. 62 in particular empowers the State Government to make rules prescribing the authority by which, the form in which, and the terms and conditions on and subject to which, any licence, permit or pass shall be granted. In exercise of this rule-making power, the State Government has framed rules laying down general licence conditions. Rule I of these Rules provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... release the same on payment of the value thereof as estimated by the Collector. (2) On the payment of such sum of money, or such value, or both, as the case may be, to the Collector, the accused person, if in custody shall be discharged, the property seized (if any) shall be released, and no further proceedings shall be taken against such person or property. The consistent view of this court right from 1937 is that an agreement of partnership entered into without the permission of the Collector for working a licence for sale of liquor granted under the Excise Act is illegal, being in violation of r. VI of the Rules prescribing the General Licence Conditions [See Nandlal v. Thomas 1. William, AIR 1937 Nag 250, CIT v. Pagoda Hotel and Restaurant [1974] 93 ITR 271 (MP) and CIT v. Sheonarayan Harnarayan [1975] 100 ITR 213 (MP) ]. The matter was recently considered by a Division Bench of this court in Narsaiya Co. v. CIT [1983] 143 ITR 304 and the same view was taken. It was held in that case that the mere making of an application to the District Excise Officer, who gave a certificate that the licensee had informed regarding the formation of a partnership for working the licence, ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ector also accepted the recommendation of the District Excise Officer to accept a compounding fee and to regularise the breach of the condition of not obtaining the permission of the Collector for entering into the partnership. As the privilege of selling foreign liquor under the licence in the name of Shantilal was being worked by the partnership from the very beginning without there being any permission of the Collector, there was obviously a breach of the condition contained in r. VI. This breach fell within the purview of s. 31(1)(b) and it would have been competent for the Collector to cancel the licences. Similarly, the breach also amounted to an offence under s. 39(c). The Collector, however, by the order dated 30th November, 1973, condoned the breaches and offences and granted permission after accepting a compounding fee. The effect of the order of the Collector, in our opinion, is clearly to grant a retrospective permission and to wipe out the breaches of r. VI. This rule does not in terms provide for prior permission for entering into a partnership and does not prohibit grant of retrospective permission. The rule prohibits entering into partnership for the working of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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