Illegal partnership under licensing law cannot qualify for registration when the business necessarily breaches mandatory statutory restrictions.

A partnership formed to carry on opium sales in breach of the mandatory licensing regime under the Opium Act, 1878 and the Punjab Opium Orders could not be treated as a valid firm for registration under section 26A of the Indian Income-tax Act, 1922. The deed contemplated all seven partners actively conducting the prohibited business, while the statutory scheme required sales to be carried on only in accordance with the licence conditions, including specification of partners on the licence and compliance with the prescribed rules. Because the arrangement would necessarily contravene those restrictions and amount to an offence, the firm was held not entitled to registration.

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Issues: Whether a partnership formed to carry on the sale of opium and poppy heads, without a licence in the firm's name and with all partners actively participating, was validly constituted and entitled to registration under section 26A of the Indian Income-tax Act, 1922.

Analysis: The partnership deed showed that all seven partners agreed to carry on the opium business and there was no stipulation that any partner was merely a financier or sleeping partner. The governing statutory scheme under the Opium Act, 1878 and the Punjab Opium Orders contemplated that opium sales could be carried on only in accordance with the licence regime, including licences granted to a partnership, specification of partners on the licence, and compliance with the relevant rules. On the facts found, the business was being carried on by persons other than the licensees, and the partnership was intended to operate in a manner that would necessarily contravene the statutory restrictions and amount to an offence under the Act.

Conclusion: The firm was not validly constituted for the purpose of the prohibited business and was not entitled to registration under section 26A of the Indian Income-tax Act, 1922.

Final Conclusion: The referred question was answered in the negative, and the assessee failed to establish entitlement to registration of the firm.

Ratio Decidendi: A partnership formed to carry on a business in direct contravention of mandatory licensing provisions governing that business cannot be treated as a valid firm for registration under section 26A of the Indian Income-tax Act, 1922.

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