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Issues: Whether registration of the partnership firm under section 26A of the Income-tax Act was rightly allowed when the partnership was formed to carry on opium sales on a licence granted only to one partner, in breach of the Opium Act and the licensing orders.
Analysis: The governing opium law permitted possession and sale only in accordance with the Act and the rules. The licence conditions required that no other person could conduct sales on the licensee's behalf unless his name had been approved and endorsed on the licence. The partnership was not licensed in its own name, and the other partners had not been approved for conducting sales. On the facts, the arrangement was intended to enable unlicensed persons to sell opium through a licence granted to one individual, which offended the statutory scheme and the public policy underlying it. A partnership formed for such an object could not be treated as lawful merely because no formal transfer of licence was shown.
Conclusion: Registration under section 26A was not rightly allowed. The question was answered against the assessee and in favour of the Revenue.
Final Conclusion: A partnership whose object necessarily involves breach of the licensing law is not entitled to registration for income-tax purposes.
Ratio Decidendi: A partnership is not registrable for income-tax purposes if its essential object is to conduct business in a manner that contravenes the governing statute or licensing conditions and is therefore unlawful or opposed to public policy.
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