1997 (11) TMI 5

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....is in the affirmative, whether the Tribunal was justified in holding that the firm was not valid and, therefore, not entitled to registration under section 185 of the Income-tax Act, 1961?" The facts of the case as stated by the High Court are as under : "The Government of Rajasthan granted a licence for the retail sale of country liquor during the year 1966-67 at Bhilwara, including the shops situated at Bhupalganj, Gulmandi and Dhanmandi in the joint names of Motilal Chunnilal and Bhanwarlal sons of Motilal. It appears that with a view to carry on the aforesaid business of retail sale of country liquor, the aforesaid licensees entered into a partnership with five other persons and constituted the firm, Motilal Chunnilal, Bhilwara, c....

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....ership amounted to violation of the conditions of the licence and the provisions of the Rajasthan Excise Act and, therefore, the contract of partnership was hit by section 23 of the Indian Contract Act, 1872. The Appellate Assistant Commissioner of Income-tax confirmed on appeal the order of the Income-tax Officer and the Tribunal on further appeal held that there was a clear prohibition in clause (3) of the licence in respect of the formation of a partnership by the licence-holders without the prior permission of the excise authorities. Thus, the provisions of the excise law have been violated as there was public policy involved in the provisions of the Rajasthan Excise Act and the Rules and the agreement of partnership was entered into in....