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Issues: Whether the registration of a pre-existing firm could be refused merely because an excise licence stood in the names of individual partners and had not been endorsed in favour of the firm.
Analysis: The firm had already been constituted and had furnished the declaration required for continuation of registration. There was no change in constitution or in the partners' shares. The refusal to register could not be sustained merely on the footing that the excise privilege had been obtained in the names of two partners, because the question under the Income-tax Act was whether a genuine firm existed for the relevant assessment year. The absence of an endorsement on the excise licence might affect the liquor business to that extent, but it did not by itself destroy the existence or genuineness of the pre-existing firm for income-tax purposes. The earlier decisions on illegal partnership applied only to the extent of the business conducted under the unauthorised privilege and did not justify denial of registration of the firm as such.
Conclusion: The refusal of registration was not justified, and the question was answered in favour of the assessee.
Ratio Decidendi: A pre-existing firm whose registration continues under section 184(7) of the Income-tax Act, 1961 cannot be denied registration merely because an excise licence obtained in the names of individual partners has not been transferred or endorsed in favour of the firm, unless the Assessing Officer establishes that no genuine firm exists for tax purposes.
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