Partnership not barred by fishing licence rules, so tax registration could not be refused without an express prohibition.

A firm cannot be denied income-tax registration merely because its constitution was changed in a manner that may reduce tax incidence, as such arrangements remain within the assessee's legal rights. The partnership was also not unlawful where the fisheries rules and licence did not expressly prohibit fishing through a partnership or otherwise declare such an arrangement invalid. In the absence of a specific bar in the governing rules, refusal of registration under section 185 of the Income-tax Act could not be sustained, and the firm was held entitled to registration.

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Issues: Whether the firm was entitled to registration under section 185 of the Income-tax Act, 1961, and whether the partnership was unlawful under the Punjab Fisheries Rules so as to disentitle registration.

Analysis: The firm's earlier changes in constitution were not accepted as a valid ground to deny registration, since such changes, even if made with a view to reducing tax incidence, were within the assessee's legal rights. On the question of illegality, the relevant fisheries rules did not contain any express prohibition against entering into partnership for fishing activities. The licence only permitted taking fish from public waters and did not forbid partnership or show that the firm arrangement was unlawful. In the absence of a rule prohibiting such partnership, the refusal to register the firm could not be sustained.

Conclusion: The firm was entitled to registration and the question was answered in the affirmative, in favour of the assessee and against the department.

Ratio Decidendi: Where the governing licence or rules do not expressly prohibit partnership, the firm cannot be denied registration merely because the activity is carried on under a licence issued in individual names or because the partnership arrangement may incidentally reduce tax incidence.

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