Partnership validity despite non-transferable trade licence upheld for income-tax registration purposes.

A partnership carrying on rice business was not rendered illegal merely because the trade licence stood in the name of one partner and was not transferable under the control order. The controlling provisions did not prohibit formation of the firm or declare such a partnership void; they contemplated that a fresh licence could be obtained on reconstitution. The licensing irregularity therefore did not affect the firm's legal existence for income-tax purposes, and the firm remained entitled to registration under section 185 of the Income-tax Act, 1961.

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Issues: Whether the assessee-firm became illegal, and was therefore disentitled to registration, because it carried on rice business under a licence standing in the name of one partner and not transferable under the control order.

Analysis: The controlling provisions did not prohibit the formation of a partnership or declare such a partnership void. They contemplated that on reconstitution of the firm a fresh licence could be sought. The mere fact that the licence stood in the name of one partner and could not be transferred did not, by itself, render the partnership illegal for income-tax purposes. The firm was valid at inception and remained a lawful partnership despite the licensing irregularity.

Conclusion: The assessee-firm did not become illegal and remained entitled to registration under section 185 of the Income-tax Act, 1961.

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