Illegal partnership in licensed liquor business cannot qualify for income-tax registration where excise law bars licence transfer.

A partnership carrying on a licensed liquor business under an excise licence standing only in one partner's name was held ineligible for income-tax registration because the licence was personal and the excise law barred transfer, subletting, or unauthorised partnership without sanction. Although the firm was genuine in fact, the business was being conducted by the partnership itself rather than by the named licensee alone, so the arrangement amounted to use of the licence in breach of statutory restrictions. A partnership formed for a business prohibited by law has an unlawful object, and its agreement is void for illegality for registration purposes.

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Issues: Whether the assessee-partnership was entitled to registration under section 26A of the Indian Income-tax Act, 1922, when the business was carried on on the strength of an excise licence standing only in the name of one partner and the partnership arrangement operated as a transfer of that licence in breach of the excise law.

Analysis: The partnership was genuine in fact, but the decisive question was whether it was legally entitled to carry on the licensed liquor business. The licence was personal to the licensee, and the excise framework prohibited transfer, subletting, or unauthorised partnership in relation to the licensed business except with the prescribed sanction. On the facts found, the business was being carried on by the partnership, not by the named licensee alone, and the partnership had no licence in its own favour. The arrangement therefore amounted to use of the licence by the partnership in contravention of the excise law. A partnership formed to carry on a business in breach of statutory prohibitions has an unlawful object and cannot be treated as a valid partnership for income-tax registration purposes.

Conclusion: The assessee-partnership was not entitled to registration and the answer to the referred question was against the assessee.

Final Conclusion: A firm constituted for carrying on a licensed liquor business in breach of the excise restrictions could not be recognized for registration under the income-tax law, because its agreement was void for illegality.

Ratio Decidendi: A partnership formed to conduct a business in violation of statutory prohibitions governing a personal licence is void for illegality and cannot be registered under the income-tax law.

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