Genuine partnership status in liquor business upheld where excise authorities approved a single-partner licence arrangement.

A partnership firm carrying on a bar hotel business under a single FL-3 licence standing in one partner's name may still be treated as a genuine firm where the excise authorities knowingly approve, renew, and accept the firm's constitution and reconstitution. On the stated facts, the arrangement was regarded as a permissible mode of conducting liquor business under the Foreign Liquor Rules and licence conditions, not as an impermissible transfer or sub-renting. The firms were therefore considered eligible for assessment as firms and for registration under section 185 of the Income-tax Act, subject to fulfilment of the other statutory conditions.

---

---

Issues: Whether a partnership firm running a bar hotel with a single FL-3 licence standing in the name of one partner could be treated as a genuine firm and granted registration under section 185 of the Income-tax Act, 1961.

Analysis: The business was carried on by partnership firms with the knowledge, approval, and renewal granted by the Excise Commissioner, notwithstanding that the licence stood in the name of only one partner. On the facts found, the arrangement was treated as a permissible mode of carrying on liquor business under the Foreign Liquor Rules and the licence conditions, and not as an impermissible transfer or sub-renting. Since the excise authorities had consistently approved the constitution and reconstitution of the firms, the firms were held to be genuine and eligible for assessment in the status of firms, including registration where required under section 185.

Conclusion: The firms were entitled to be treated as genuine partnership firms and to registration under section 185 of the Income-tax Act, 1961, subject to fulfilment of the other statutory conditions.

Final Conclusion: The Revenue's appeals failed because liquor business conducted by a partnership firm with a licence obtained by one partner was held to be legally permissible on the facts, and the firms remained assessable as registered firms where applicable.

Ratio Decidendi: Where the excise authorities knowingly approve and renew a liquor licence arrangement carried on by a partnership firm through one partner's licence, the firm cannot be denied genuine-firm status or registration solely because the other partners do not hold separate licences.

---