TaxTMI 
TaxTMI 
1995 (11) TMI 2
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....icence in Form C. S. No. 3, in spite of written intimation, dated April 27, 1967, about its constitution ? " The High Court rejected the applications on the ground that the question sought to be raised by the assessee was concluded against it by the two decisions of that court, viz., CIT v. Sheonarayan Hatnarayan [1973] TLR 1186; [1975] 100 ITR 213 (MP) and CIT v. Pagoda Hotel and Restaurant [1974] 93 ITR 271 (MP). A licence for retail sale of country spirit under supply system in Form C. S. No. 3 of the Madhya Pradesh Excise Rules, 1960, was obtained by Bihari lal Jaiswal in respect of twenty-two out-stall shops in Tehsil Sarangarh, District Raigarh, in the public auction held in January, 1968. The licence was effective for the period commencing on April 1, 1968, and ending with March 31, 1969. Biharilal Jaiswal entered into a partnership with ten other persons to conduct the business under the said licence. The partnership is evidenced by the deed dated August 30, 1968. An application for grant of registration to the said firm under sections 184 and 185 of the Act was filed in Form No. 11. The Income-tax Officer rejected the application for registration on the ground that t....
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.... same contract individually for want of funds and whereas the parties Nos. 1 to 8 named above having agreed to carry on the above contract business in partnership with effect from April 1, 1968, desire to reduce in writing and place in a legal form the terms and conditions under which they have agreed to carry on the partnership business, they do hereby declare and stipulate that they have been partners in the firm named and styled as 'Girdharilal Jaiswal Liquor Contractor, Bhopal', on the terms and conditions as detailed below : " Clause (7) of the partnership deed provided that : " No partner shall be entitled to any remuneration for taking part in the conduct of the firm and that all the partners shall carry on the same to the common advantage, be just and faithful to each other and shall render the accounts and full information of all things effective the firms business. " In Pagoda Hotel and Restaurant's case [1974] 93 ITR 271, a Division Bench of the Madhya Pradesh High Court had opined that the prohibition contained in clause (VI) of the General Licence Conditions is absolute and is couched in wide terms. Since the said clause expressly prohibited the entering into ....
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....us year in existence a genuine firm with the constitution so specified, he shall pass an order in writing registering the firm for the assessment year ; (b) if he is not so satisfied, he shall pass an order in writing refusing to register the firm." The position emerging from the above two sub-sections is this : an application for registration of a firm for the purposes of the Act could be made on behalf of any firm if the partnership was evidenced by instrument and that instrument specified the individual shares of the partners. On such application being filed, the Income-tax Officer was obliged to enquire into the genuineness of the firm and its constitution as specified in the instrument of partnership and if, on such enquiry, he was satisfied that a genuine firm with the constitution as specified in the instrument of partnership was in existence during the relevant previous year, he was obliged to grant registration. If, however, he was not so satisfied, he was to reject the application. In the present case, the partnership was evidenced by an instrument of partnership which specified the individual shares of the partners. The truth of the partnership agreement was not....
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....ay be, learned counsel says, the said partnership would not be recognised by, and may not be able to enforce any of their rights against, the Excise Department but so far as the Income-tax Act is concerned, such a partnership existed in fact and did actually do the business during the relevant previous year. In other words, learned counsel says, the partnership was a genuine partnership. It was evidenced by an instrument of partnership specifying the individual shares of the partners and, therefore, entitled to grant of registration. Learned counsel for the Revenue, on the other hand, submits that since the excise law in force in Madhya Pradesh at the relevant time prohibited the entering into of partnerships for the working of the privilege granted under the licence without the written permission of the Collector, no such partnership can be recognised in law. What is prohibited by one enactment cannot be recognised or sanctioned by another enactment. This should be so, he says, even if the enactment prohibiting the partnership is a State enactment and the Act whereunder registration is sought is a Parliamentary enactment ; otherwise, it would be opposed to public policy. Learned c....
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....It was a case of the licensee entering into a partnership with others for doing the business under the licence. Though the High Court had proceeded on the footing that the excise licence concerned therein was governed by rule 322, which prohibited the holder of the licence from entering into a partnership with another person, this court found, as a matter of fact, that the licence concerned therein was not governed by rule 322 but by a different rule in the Uttar Pradesh Excise Rules. The licence was issued in Form FL-II. It did not prohibit the licensee from entering into partnership with respect to the business under the licence. It merely provided that the licensee shall not sub-let or transfer the licence. In this view of the matter, this court held that the question whether the partnership was illegal did not arise in that case and the firm was entitled to registration. This is what the court said : " The Commissioner and the High Court proceeded on the footing that the licence was governed by rule 322 which prohibited the holder of the licence from entering into a partnership with another person. But the licence, it is clear from the record, was in Form FL-II issued under ....
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....he business under the licence and that it merely prohibited the transfer of the licence. On this basis, the High Court held that the partnership entered into by the licensees in the cases before them cannot be said to be opposed to or violative of sub-rule (1) of rule 19. So far as sub-rule (2) of rule 19 is concerned, the High Court construed it as not applicable to a case where the licence was granted in the name of a single person. The High Court opined that sub-rule (2) applied only where the licence was granted jointly in the names of two or more persons, i.e., to a partnership, in which case, it held, the sub-rule provided that no partners shall be excluded or included without the previous permission of the licencing authority. In the words of the High Court, the position under rule 19(2) is this : " Rule 19(2) requires that whenever a new partner is introduced or excluded, the previous permission of the licensing authority should be obtained. But if such permission is not obtained, the partnership is not rendered illegal. As between the partners it continues to be valid and entitled to registration under the Income-tax Act." On the above reasoning, the High Court held that t....
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....nce is granted for dealing in intoxicating liquors, the business wherein is res extra commercium---and also because they are supposed to be harmful and injurious to the health and morals of the members of the society-close control is envisaged and provided over the business carried on under the licence. This object will be defeated if the licensee is permitted to bring in strangers into the business, which would mean that instead of the licensee carrying on the business, it would be carried on by others---a situation not conducive to effective implementation of the excise law and consequently deleterious to public interest. It is for this very reason that transfer or subletting of licences is uniformly prohibited by several State excise enactments. It, therefore, follows that any agreement whereunder the licence is transferred, sublet or a partnership is entered into with respect to the privilege/business under the said licence, contrary to the prohibition contained in the relevant excise enactment, is an agreement prohibited by law. The object of such an agreement must be held to be of such a nature that if permitted it would defeat the provisions of the excise law within the mean....