Unlawful partnership in licensed excise business justified refusal of registration when the firm took over business and management.

A partnership formed to carry on a licensed excise business was held unlawful where the licence was not transferred with prior Collector permission and the firm itself took over the business and management. On those facts, the arrangement was treated as a prohibited transfer of the licensed business, contrary to the excise rules barring transfer or sub-lease without permission. The partnership was therefore regarded as formed for an unlawful object, and refusal to register the firm under the income-tax law was justified.

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Issues: Whether an agreement of partnership formed for carrying on excise business, where the licence was not transferred with the Collector's permission and the firm took over the business and management, was unlawful so as to justify refusal of registration under the income-tax law.

Analysis: The partnership was entered into in respect of a licensed excise business governed by excise rules prohibiting any transfer or sub-lease of the licence, even partly, without previous permission of the Collector. On the facts found, the firm did not merely provide finance while the licensee alone carried on the business; rather, the business itself, including its management, was taken over by the firm. In such circumstances, the arrangement amounted to a prohibited transfer of the licensed business and was inconsistent with the excise law. The authorities and the Tribunal were therefore right in treating the partnership as one formed for an unlawful object, and the cases relied upon for a different result were distinguishable on their facts.

Conclusion: The partnership agreement was unlawful and the refusal to register the firm was justified.

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