Partnership in liquor business held valid where licence stayed unchanged and no statutory bar on taking partners existed.

A liquor business partnership was held not illegal where the excise licence remained in the original licensee's name and was not transferred without permission. Rule 72B barred transfer of the licence without prior written permission, but did not expressly prohibit the licensee from taking partners in the business. As no statutory prohibition was breached, the firm was treated as genuine and the requirements for registration under section 185 of the Income-tax Act were satisfied. The firm was therefore entitled to registration, and the revenue's objection based on alleged illegality failed.

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Issues: Whether the partnership formed by the licensee for carrying on the liquor business, without transferring the licence or obtaining prior permission, was valid and entitled the firm to registration under the Income-tax Act.

Analysis: Rule 72B of the Rajasthan Excise Rules, 1956 prohibits transfer of a licence without previous written permission, but it does not impose an express prohibition against the licensee taking partners in the business. The licence in the present case remained in the name of the original licensee and was not transferred. The partnership merely enabled the business to be carried on by the firm under the existing licence. Since the statutory bar relied upon by the Revenue was absent, the partnership could not be treated as illegal. The conditions for registration under section 185 of the Income-tax Act were satisfied, including existence of a genuine firm evidenced by an instrument of partnership.

Conclusion: The partnership was valid, there was no contravention of the Rajasthan Excise Act or the Rules, and the firm was entitled to registration.

Final Conclusion: The question referred by the Tribunal was answered in favour of the assessee and against the Revenue, affirming the firm's right to registration.

Ratio Decidendi: In the absence of an express prohibition against entering into partnership, and where the licence is neither transferred nor legally breached, the firm remains valid and registrable under the Income-tax Act.

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