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Issues: Whether the partnership was void and incapable of registration under section 185 of the Income-tax Act, 1961 because it was formed in a manner that defeated the liquor licensing law and the conditions attached to the licence.
Analysis: The licence under the Maharashtra excise regime was personal to the licence-holder, and the relevant rules required declaration and recognition of partners before they could be treated as partners for the purpose of the licence. The partnership deed, read with the surrounding facts, showed that the licence-holder had obtained the wholesale licence and then admitted other partners, including a member of the family that the Government had expressly required him to dissociate from the retail business. The deed also permitted all partners to participate fully in the business without restriction. On these facts, the arrangement was not treated as a mere technical irregularity but as a designed method to exploit the licence in a manner not permitted by law. Such an agreement fell within section 23 of the Indian Contract Act, 1872, as one that would, if permitted, defeat the provisions of law.
Conclusion: The partnership was void and the assessee was not entitled to registration; the refusal of registration was justified.
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