Liquor partnership without endorsed Collector permission is void and cannot support Income-tax registration.

A partnership formed to carry on liquor business without the Collector's written permission endorsed on the licence did not satisfy the mandatory Madhya Pradesh Excise Rules and was void ab initio. The requirement of specific written permission and endorsement could not be replaced by substantial compliance, because the licence conditions were treated as compulsory. As the partnership was legally invalid, it could not support registration of the firm under the Income-tax Act, and the refusal of registration was upheld on that basis. The discussion also distinguishes a cited Supreme Court decision on the ground that the prohibition there did not apply to the relevant licence form.

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Issues: (i) Whether a partnership formed for carrying on liquor business without the Collector's written permission endorsed on the licence could be treated as valid under the Madhya Pradesh Excise Rules; (ii) whether registration of the assessee-firm under the Income-tax Act was rightly refused on that basis.

Issue (i): Whether a partnership formed for carrying on liquor business without the Collector's written permission endorsed on the licence could be treated as valid under the Madhya Pradesh Excise Rules.

Analysis: The relevant rule required the written permission of the Collector for entering into a partnership for the working of the licence privilege, and further required that such permission be endorsed on the licence. The certificate produced by the assessee was issued by the District Excise Officer and did not show that the Collector had granted permission or that the permission had been endorsed on the licence. Substantial compliance was not enough where the rule demanded specific written permission and endorsement. The partnership therefore offended the mandatory licence conditions.

Conclusion: The partnership was not validly formed under the Excise Rules and was void ab initio.

Issue (ii): Whether registration of the assessee-firm under the Income-tax Act was rightly refused on that basis.

Analysis: Since the partnership itself was illegal for want of the Collector's written permission and endorsement on the licence, it could not support registration under the Income-tax Act. The earlier decisions taking the same view were followed, and the Supreme Court decision relied upon was distinguished on the ground that the relevant prohibition there was inapplicable to the licence form concerned.

Conclusion: The refusal of registration was and the answer was against the assessee.

Final Conclusion: The reference was answered by holding that the liquor partnership was invalid for non-compliance with the excise licence conditions and that registration under the Income-tax Act could not be granted.

Ratio Decidendi: A partnership in liquor business formed without the Collector's written permission endorsed on the licence is void and cannot qualify for registration under the Income-tax Act.

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