Statutory bar on liquor partnerships without endorsed permission makes the arrangement void for tax registration.

A partnership carrying on liquor business under a licence in the name of one partner was invalid for tax registration because the Madhya Pradesh Excise Rules prohibited working a liquor privilege in partnership without the Collector's written permission endorsed on the licence. A mere intimation to the Collector was insufficient, and a partnership formed in breach of that statutory bar offended section 23 of the Indian Contract Act. The liquor business therefore could not be treated as a valid partnership for registration under section 26A of the Indian Income-tax Act, 1922, although the medicines business stood on a separate footing and could still support registration.

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Issues: Whether a partnership carrying on liquor business under a licence standing in the name of one partner, without written permission of the Collector endorsed on the licence, was entitled to registration under section 26A of the Indian Income-tax Act, 1922.

Analysis: Under rule VI of the Madhya Pradesh Excise Rules relating to General Licence Conditions, framed under section 62 of the Madhya Pradesh Excise Act, 1915, a privilege of supply or sale could not be worked in partnership without the Collector's written permission endorsed on the licence. A mere intimation to the Collector was insufficient. In the absence of such permission, a partnership for the actual carrying on of liquor business was contrary to the statutory prohibition and offended section 23 of the Indian Contract Act. The licence conditions were materially different from a mere permit regime where possession of the subject-matter was not itself unlawful. The business relating to medicines stood on a separate footing, but the liquor business could not be treated as a valid partnership for registration purposes.

Conclusion: The assessee-firm was not entitled to registration under section 26A of the Indian Income-tax Act, 1922 in respect of the liquor business, though registration could still stand for the medicines business.

Ratio Decidendi: Where the governing excise law expressly prohibits partnership in the working of a liquor privilege without written permission endorsed on the licence, a partnership formed in breach of that prohibition is void and cannot be granted registration for tax purposes.

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