TaxTMI 
TaxTMI 
1959 (12) TMI 52
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....r provides that the business should be owned by the partners in four equal shares; one share to be held by a group consisting of three partners; another by a group comprising of two; the third by another group of two partners; and the fourth share by five partners. Paragraph 4 of the deed also provides that the profits or losses of the partnership should be divided among the 12 partners in the manner mentioned therein. Paragraph 8 states that the closing stocks of tobacco, beedi leaves, etc., held by the partners on 31-12-1124 should be taken over by the firm's head office either as outright purchase or for commission sales; and the cost of such goods be credited in the accounts of the partners who held them. The other relevant provisions of the partnership deed are that the daily collections of each shop are to be sent to the head office on the same day, or thrice a week; are to be credited to the respective shops; and certain persons are to manage and to attend full time to the firm's business. The details concerning the shops and which partner held what licence can best be described by giving the following extract from paragraph 4 of the statement of case to this court: ....
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....ence with fine which may extend to five hundred rupees." We should now give the relevant parts of the Notifications that were applicable for the auctions, at which the partners had obtained the licensees. It is Notification N.D. 148 and is dated May 20, 1948. The relevant parts are the following: "1. The A class licensees will have the right of import and sale to B class licensees as provided for under the rules. They may also purchase tobacco from any of the stockist licensees, or from another A class licensees in the State. B class licensees will have the privilege of sale only to consumers and to the C class licensees in accordance with the conditions of such licences. B class licenses should make their purchases of tobacco from A class licensees only. 4. The licensee shall not lease out, sell or otherwise transfer the subject-matter of his contract or licence without the written consent of the Excise Commissioner." To continue with the statement of facts, the application was made to the Income-tax Officer for the registration of the firm under section 26A of the Indian Income-tax Act, 1922, and the officer held that the firm having been constitu....
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....R. 271). But before assigning our reasons it is but proper to state what has been decided in the other cases. In Gouri Shankar v. Mumtaz Ali Khan ([1878-80] I.L.R. 2 All. 411) there was a lease for three years of a Government ferry with a covenant not to underlet or assign the lease without the leave of the person who had granted it, but the lessee admitted another as his partner and the Full Bench held that such a partnership was not void by reason of the covenant not to underlet or assign the lease. The decision in Radhey Shiyam v. Mewa Lal ([1929] I.L.R. 51 All 506) is more helpful to the assessee; for there was an agreement between the licensee and a third person for sharing the profits and losses in the business under the licence and the learned judges held that, though rules 80, 82 and 86 under sections 40 and 41 of the United Provinces Excise Act permitted transfer of licences only with the permission of the Collector, the agreement did not amount to transfer or sub-lease of the liquor contract, and was, therefore, not void. In Karsan v. Shivaji ([1912] I.L.R. 37 Bom. 320) the defendant had obtained a licence under the Bombay Abkari Act to sell country liquor and one of t....
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....ial interests in what he has in favour of another, and thereby does what the rule seeks to forbid without permission. The same result is reached when prohibition against transfer of possession is analysed; for it cannot be disputed that by becoming a partner a licensee in possession of the goods converts without transfer of corpus his possession into that of an agent. The vicarious possession is then substantially different and the rule against transfer is attracted. We therefore think the view of Horwill, J., in Velu Padayachi v. Sivasooriam A.I.R. 1950 Mad. 444, that mere entering into partnership amounts to transfer of licensee's right is correct and the contract to do so is void because such a transfer is prohibited. We further think Umacharan Shaw v. Commissioner of Income-tax [1959] 37 I.T.R. 271 does not overrule this view, for in the case before the Supreme Court the partnership did not create a benefit that had not existed prior to its formation. The case therefore states the proposition that when no benefit is created the rule against transfer is not attracted. The first ground therefore taken to sustain the order by the Appellate Tribunal fails. The counsel for th....