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TMI Blog1972 (12) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... Umashanker. Previous to that, Harnarayan was a partner of the firm along with Umashanker, but, after the death of Harnarayan, Sheonarayan, and Umashanker formed a partnership by a deed dated September 20, 1952, for carrying on business in medicines and liquor. The liquor business was carried on by the partnership firm on the basis of a licence granted by the Government in the name of Umashanker. The respondent-firm, therefore, applied for registration for the purposes of the Indian Income-tax Act, 1922, and an application was made to the Income-tax Officer for registration under section 26A of that Act within the prescribed time. The respondent-firm stated that it had duly intimated to the Collector that the liquor business in respect of which licence had been issued in the name of Umashanker, who was one of the partners, would be carried on by the partnership firm. The Income-tax Officer refused registration to the respondent-firm on the ground that the assessee could not prove that it had intimated to the Collector the fact that the liquor business would be carried on by the firm. The Income-tax Officer was further of the opinion that the contract of partnership in respect of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsented to the liquor business being carried on in partnership. Thus, a mere intimation to the Collector would not be sufficient. From this point of view, the question arises whether the action of the respondent-firm in insisting on carrying on the liquor business in partnership would be void, it being opposed to public policy, as per section 23 of the Indian Contract Act. If it be considered to be void, then naturally, the Income-tax Officer would be justified in refusing registration of the firm for the purpose of liquor business. At this stage, it is pertinent to note that the Income-tax Officer granted the request of the respondent-firm for registration for the purposes of the business of medicines and registration was refused only in respect of the liquor business. At the outset, we might observe that the case of Dayabhai Co. v. Commissioner of Income-tax would stand on a slightly different footing and it cannot be considered to be an authority for the proposition canvassed in the present case. Dayabhai's case was a case of a permit granted under the Motor Vehicles Act, 1939. The Income-tax Officer refused registration as, in his opinion, sections 31 and 59 of the Motor V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cle or vehicles to which the permit relates are not driven at a speed exceeding the speed lawful under this Act ; (c) that any prohibition or restriction imposed and any fares or freights fixed by notification made under section 43 are observed in connection with any vehicle or vehicles to which the permit relates ; (d) that the vehicle or vehicles to which the permit relates are not driven in contravention of the provisions of section 5 or section 72 ; (e) that the provisions of this Act limiting the hours of work of drivers are observed in connection with any vehicle or vehicles to which the permit relates ; and (f) that the provisions of Chapter VIII so for as they apply to the holder of the permit are observed. " We may observe that sections 31 and 59 of the Motor Vehicles Act, 1939, require a motor vehicle to be run under a permit and on certain conditions. Mere possession of a motor vehicle is by itself no offence. Therefore, we are clearly of the opinion that cases of permit where its working depends on certain conditions would stand on a different footing from a permit required for an article, the mere possession of which without a permit would constitute an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... J. William and held that, in such a case, the partnership would be illegal, it being void ab initio. For the purpose of convenience, we may reproduce rule VI of the Madhya Pradesh Excise Rules relating to the General Licence Conditions. The same is as follows: " No privilege of supply or sale shall be sold, transferred or sub-leased nor shall a holder of any such privilege enter into a partnership for the working of such privilege in any way or manner without the written permission of the Collector, which shall be endorsed on the licence ...... " The clear implication of rule VI is that there cannot be a partnership for the working of such a privilege unless there be a written permission of the Collector which has to be endorsed on the licence. The learned counsel for the respondent-firm, however, challenged the view expressed by the Division Bench of this court in Commissioner of Incomc-tax v. Pagoda Hotel Restaurant, on the ground that the case of Jer Co. v. Commissioner of Income-tax had been reversed by their Lordships of the Supreme Court in Jer Co. v. Commissioner of Income-tax. In this connection, we might observe that the reason why their Lordships of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndu family governed by the Dayabhaga law. The family carried on the business of sale of foreign liquor and the licences for its three shops were held in the different names of the members, but not in the name of the family. The family was disrupted in 1938 and, on April 7, 1939, the three brothers entered into a deed of partnership which was registered by which they agreed to carry on the business in partnership. They opened a separate book of account which they called the bati khata which purported to show the capital contribution and accounts of the partners as well as the division of profits amongst them. Their application for registration of the partnership was rejected and the profits of the business continued to be assessed in the hands of the joint family. One of the brothers died in the year 1945 and, as per the terms of the partnership deed, his son was admitted as a partner. Thereafter, another brother died on January 25, 1947, and his son was also admitted to the partnership. On April 10, 1947, on account of these deaths and new admissions, a fresh partnership deed was entered into by the surviving brother and the sons of the two deceased brothers in respect of the three ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the partnership purports to participate in the actual management of the liquor shop or in conducting sales or in doing any actual work, such a partnership would necessarily be void as being opposed to public policy, the same being in contravention of rule VI of the Madhya Pradesh Excise Rules relating to General Licence Conditions. Therfore, we are unable to accept the contention of the learned counsel for the respondent-firm and, in our opinion, the present case would precisely be governed by the pronouncement of a Division Bench of this court in Commissioner of Income-tax v. Pagoda Hotel Restaurant, and we see no reason to depart from the view expressed by that Division Bench. As a result of the discussion aforesaid, we would answer the question referred to us as follows : On the facts and in the circumstances of the case, the assessee-firm constituted by the instrument of partnership, dated September 20, 1952, was not entitled to the grant of registration for the assessment year 1960-61 under section 26A of the Indian Income-tax Act, 1922, in respect of the liquor business, although it might have been entitled to registration in respect of the business relating to medic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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