Illegal partnership object in transport business bars firm registration when stage carriage permits belong to a non-partner company.

A partnership formed to operate buses using stage carriage permits standing in the name of a non-partner company was held to have an illegal object under the Motor Vehicles Act because the business depended on permits and vehicles being used without lawful transfer or permission. The Court distinguished cases where a partner himself held the permit and treated the present arrangement as fundamentally different, since the permit-holder was a stranger to the firm. As the partnership's substratum was unlawful from inception, the agreement was void ab initio and continuance of registration under section 185 of the Income-tax Act, 1961 was rightly refused.

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Issues: Whether a partnership formed to commercially exploit buses and stage carriage permits standing in the name of a third-party company carried on an object illegal under the Motor Vehicles Act, and whether such illegality barred continuance of registration under section 185 of the Income-tax Act, 1961.

Analysis: The partnership was constituted solely to run buses on routes covered by permits held by a company that was not a partner. The arrangement was found to be more than a mere irregularity in carrying on business: the partnership's very substratum was the use of vehicles and route permits without lawful transfer or permission under the Motor Vehicles Act. The Court distinguished cases where a partner himself held the permit, and held that those authorities did not assist where the permit-holder was a stranger to the firm. Since the business depended entirely on an unlawful arrangement contrary to the statutory scheme governing stage carriage permits, the object of the partnership was tainted from inception. A partnership formed for such purpose could not be treated as lawful or genuine for registration purposes.

Conclusion: The partnership object was illegal, the agreement was void ab initio, and continuance of registration under section 185 of the Income-tax Act, 1961 was rightly refused; the answer to the reference was against the assessee and in favour of the Revenue.

Final Conclusion: The reference was answered by holding that a firm constituted to exploit transport permits held by a non-partner company could not claim the benefit of registration under the Income-tax Act.

Ratio Decidendi: Where a partnership is formed for the very purpose of carrying on business through a statutory permit unlawfully used by a stranger to the firm, the object of the partnership is illegal and registration as a firm under the Income-tax Act can be refused.

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