Retrospective permission under liquor licence rules can validate partnership and support income-tax registration.

A partnership formed to work a liquor licence without prior written permission of the Collector was treated as capable of validation where permission had been sought from the outset and later granted. The Court read the excise rules as not barring retrospective regularisation, and held that the Collector's later endorsement of the licences and acceptance of a compounding fee wiped out the earlier breach. On that construction, the partnership was valid from the beginning of the licence period and was entitled to registration and continuation of registration under the Income-tax Act, 1961.

---

---

Issues: Whether a partnership formed to work a liquor licence without prior written permission of the Collector under the General Licence Conditions was illegal, and whether subsequent permission and compounding by the Collector operated retrospectively so as to entitle the firm to registration and continuation of registration under the Income-tax Act, 1961.

Analysis: The relevant excise framework prohibited transfer, sub-lease, or partnership in the working of the privilege without the Collector's written permission, and breach of the licence conditions could attract cancellation, suspension, penalty, or composition. The Court noted that the firm had sought permission from the outset, that the applications remained pending for years, and that the Collector later regularised the breach, endorsed the licences in favour of the firm, and accepted a compounding fee. On a reasonable construction of Rule VI, no express bar prevented retrospective permission; accordingly, the later order could wipe out the earlier breach and validate the partnership from the beginning of the licence period.

Conclusion: The partnership was valid and was entitled to registration and continuation of registration under the Income-tax Act, 1961.

---