Unlawful partnership for arrack business cannot be registered when it breaches licence conditions and Abkari law.

A partnership formed to carry on arrack business on licences standing only in the name of one or some partners was treated as unlawful because it breached licensing conditions and the prohibitory scheme of the Abkari law. The arrangement was regarded either as an impermissible transfer of the licence or as carrying on business without a valid licence. A partnership with such an unlawful object was void ab initio, and a firm constituted under that void agreement could not obtain registration under Section 26A of the Income-tax Act. The refusal to register the firm was therefore upheld.

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Issues: Whether a partnership formed to conduct an arrack business on licences standing in the name of only one or some of the partners could be registered as a firm under Section 26A of the Income-tax Act.

Analysis: A partnership entered into for the purpose of carrying on an arrack business in breach of the licensing conditions and the prohibitory provisions of the Abkari law was held to be unlawful. Such an arrangement either amounted to an impermissible transfer of the licence or involved carrying on business without a licence in contravention of the statutory scheme. A partnership with an unlawful object was treated as void ab initio, and a firm constituted under such a void agreement could not claim registration under Section 26A.

Conclusion: The refusal to register the firm was justified, and the answer to the referred question was in the affirmative, against the assessees.

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