Profit-sharing in a licensed liquor business does not defeat registration unless the excise privilege is actually transferred.

A partnership carrying on a licensed liquor business was treated as valid for income-tax registration because the licence remained in the first partner's name, the business continued under that name, capital was contributed only by him, and the second partner's role was limited to management. On those facts, the arrangement was not regarded as a transfer, letting or assignment of the excise privilege under the Bihar and Orissa Excise Act, 1915. Admission of a partner to share profits, without an actual transfer of the licensed right, did not make the firm illegal or defeat registration under section 26A of the Indian Income-tax Act, 1922.

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Issues: Whether the assessee-firm was entitled to registration under section 26A of the Indian Income-tax Act, 1922, for the assessment years 1959-60 and 1960-61 in view of the excise-law objection that the partnership amounted to a transfer or assignment of the liquor licence.

Analysis: The partnership deed showed that the licence remained in the name of the first partner, the business continued under his name, the capital was contributed by him alone, the second partner had only a managerial role, and the deed required compliance with the excise law. On these terms, the arrangement did not amount to a transfer, letting, or assignment of the excise privilege within the meaning of sections 22 and 23 of the Bihar and Orissa Excise Act, 1915. Admission of a partner to a share in profits, without a direct transfer of the licensed right, was not treated as illegality defeating registration.

Conclusion: The assessee-firm was legally entitled to registration under section 26A for both assessment years, and the reference was answered against the Revenue.

Ratio Decidendi: A partnership for carrying on a licensed business is not invalid, and does not bar registration under the Income-tax Act, merely because one partner shares profits or assists in management, unless the licence or the licensed privilege is actually transferred, let, or assigned in contravention of the governing excise law.

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