Unlawful transfer of liquor licence privilege bars recognition of partnership for income-tax registration.

A partnership arrangement used to exploit an abkari auction privilege was held unlawful where the successful bid stood only in one person's name and the alleged transfer of the liquor licence privilege to the firm was prohibited by rule 6(22) of the Kerala Abkari Shops (Disposal in Auction) Rules, 1974. Because the arrangement was hit by the statutory prohibition and treated as void under section 23 of the Indian Contract Act, 1872, and there was no contemporaneous material showing that the bid was made for and on behalf of the firm, the firm could not be regarded as genuine for registration under section 184 of the Income-tax Act, 1961. Registration was therefore refused and the challenge failed.

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Issues: Whether the firm was entitled to registration under section 184 of the Income-tax Act, 1961 when the bid in the abkari auction was in the name of the petitioner and the alleged partnership involved transfer of a liquor licence privilege prohibited by the Abkari Rules.

Analysis: Registration of a firm depends upon compliance with the statutory requirements, but the Court found that the real obstacle was the legality of the underlying arrangement. The successful bidder obtained only a personal privilege under the abkari law, and the transfer of that privilege to a firm was prohibited by rule 6(22) of the Kerala Abkari Shops (Disposal in Auction) Rules, 1974. Such a transfer was treated as unlawful and void under section 23 of the Indian Contract Act, 1872. Since there was no contemporaneous material showing that the auction bid was made for and on behalf of the firm, and the arrangement was hit by the statutory prohibition, the partnership could not be regarded as a genuine one for income-tax registration purposes.

Conclusion: The refusal of registration was upheld and the challenge to it failed.

Ratio Decidendi: A partnership formed to exploit a liquor licence or auction privilege in contravention of a statutory prohibition is unlawful and void, and such an arrangement cannot be recognised as a genuine partnership for registration under the Income-tax Act, 1961.

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