Law:

Section:

Section 184 of the Income-tax Act, 1961 - Firm - Position prior to 1-4-1993 - One 'N' took liquor contracts - He formed partnership with other persons for carrying on said liquor business - However, written permission of Collector was neither obtained nor such permission was endorsed on licence as required by rule 6 of M.P. Excise Rules - Whether, in aforesaid circumstances, firm was not validly constituted, and, therefore, it was not entitled to registration - Held, yes FACTS One 'N' took five liquor contracts. He executed a deed of partnership along with other person for carrying on the above liquor business. The firm sought registration under section 184. The ITO rejected the application for registration on the ground that the partnership was entered into without the prior permission of the Collector and it was illegal. The same view was taken by the AAC. Before the Tribunal 'N' produced certificate issued by the District Excise officer to the effect that he was permitted to change the ownership and working of the business. The Tribunal however upheld the view taken by the AAC holding that the certificates produced did not show that the permission of the Collector was obtained and that the said permission was endorsed on the licence granted under the Excise Act. On reference : HELD The licences granted under the Excise Rules contain a condition that the licensee is bound by the General Licence Conditions prescribed by the Rules. Section 39 of the Excise Act makes any act done in breach of any of the conditions of the licence punishable as a criminal offence. An agreement of partnership in liquor contract entered in violation of rule 6, i.e., without the permission of the Collector and without the permission being endorsed on the licence was void ab initio. Rule 6, on a plain reading, requires the written permission of the Collector. It further requires that permission be endorsed on the licence. The District Excise Officer is not the Collector. The certificate issued by the former did not say that permission was granted by the Collector. Even assuming that the District Excise Officer permitted the formation of the partnership after receiving the intimation…

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