Illegal liquor partnership void under public policy, so income-tax registration could be refused.

A partnership formed to conduct abkari business by treating a liquor licence held in one partner's name as firm property was held void, because the arrangement effectively shared and transferred part of the exclusive privilege attached to the licence in breach of the restrictive abkari rules and public policy. Applying section 23 of the Indian Contract Act, 1872, the court treated an agreement to share liquor privileges as prohibited and unenforceable. As the partnership itself was illegal, the assessing authority was justified in refusing registration under the Income-tax Act, 1961.

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Issues: Whether a partnership formed to carry on abkari business by treating a licence obtained in the name of one partner as the property of the firm was illegal and whether such a firm was entitled to registration under the Income-tax Act, 1961.

Analysis: The partnership deed showed that the licence was intended to be treated as firm property and that the business under the licence was to be carried on by the firm with the associated rights and liabilities. On that basis, the arrangement involved sharing and transferring a portion of the exclusive privilege attached to the licence in favour of the other partners. Such a transfer was inconsistent with the restrictive scheme of the abkari rules and attracted the principle that an agreement opposed to law and public policy cannot be enforced. The court followed the earlier view that a partnership entered into for sharing liquor privileges is prohibited and void under section 23 of the Indian Contract Act, 1872. Since the partnership itself was void, the assessing authority was justified in refusing registration.

Conclusion: The partnership was illegal, and refusal of registration was upheld in favour of the Revenue.

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