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Issues: Whether the assessee-firm was entitled to registration under the Indian Income-tax Act, 1922, when the excise licences stood in the names of only some partners and the partnership included non-licensee partners.
Analysis: A partnership is not invalid merely because business is carried on under a licence standing in the name of one or more partners, if neither the statute nor the licence prohibits such an arrangement. The illegality of a partnership must be distinguished from illegality, if any, committed in the course of business operations. In the absence of evidence that the excise licences were transferred, sub-let, or otherwise assigned to the firm, the partnership could not be treated as void ab initio. The authorities relied on by the revenue were distinguished because they involved an express statutory bar or a clear transfer of licence.
Conclusion: The assessee-firm was entitled to registration under section 26A of the Indian Income-tax Act, 1922.
Ratio Decidendi: A partnership formed to carry on a licensed business is valid, and registration cannot be refused merely because some partners are not licensees, unless the statute or the licence expressly prohibits the partnership or there is proof of transfer or assignment of the licence to the firm.
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