Law:

Section:

Section 184, read with section 185 of Income-tax Act, 1961, read with rule 37 of Punjab Liquor Licence Rules, 1956 - Firm - Position prior to 1-4-1993 - After securing liquor-licence, two persons namely 'H' and 'P' joined hands with eight other persons and formed a partnership firm to carry on liquor business under said licnece - ITO denied registration under sections 184 and 185 - Tribunal, however, allowed registration - Whether in view of clear finding of Tribunal that name of eight persons who were strangers to licence, were not endorsed on licence in terms of rule 37, sub-rule 26 of 1956 Rules, assessee-firm was not entitled to be registered for purpose of Income-tax under sections 184 and 185 as it carried on business of possessing and selling liquor in violation of Punjab Excise Act, 1914 and 1956 Rules - Held, yes FACTS Two persons 'H' and 'P' after securing liquor license and contract to carry on the liquor business, joined hands with eight other persons and formed a partnership-firm. The firm applied for registration under sections 184 and 185. The ITO denied registration, but, on appeal, the Tribunal allowed it. On reference : HELD Under the provisions of the Punjab Excise Act, 1914 and the Punjab Liquor Licence Rules, 1956, no person shall possess beyond the permissible quantity of intoxicant, i.e., liquor for consumption or sale without licence. If the licensee is a firm, it is prohibited from taking a new partner without the approval of the concerned authorities. The rule also prohibits anybody to sell on behalf of the licensee unless the name of such persons is approved and endorsed on the licence. By virtue of the conditions in the licence to the effect that the licnece was granted subject to the provision of the rules, the aforesaid provision of the rules stood incorporated as conditions in the licence. There was the clear finding by the Tribunal that the names of the eight persons stranger to the licence were not endorsed on the licence in terms of rule 37, sub-rule 26. In such a situation, the partners might have complied with all the requisites under the Partnership Act, or the provisions of the Contract Act, for the purposes of entering…

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