Law:

Section:

Section 184 of the Income-tax Act, 1961 - Firm - Registration - Entitlement to -One R was granted licence to carry on liquor business under Rajasthan excise act -'R' entered into partnership with other persons and formed assessee-firm - No permission was obtained by 'R' from excise authorities prior to entering into aforesaid partnership - Though under rules framed under said Excise Act, there was prohibition against selling or transferring licence without prior permission there was no prohibition against entering into partnership - Whether in view of said rules, aforesaid partnership entered into by R could not be said to be unlawful and, thus, assessee was entitled to registration - Held, yes FACTS One 'R' was granted a licence to carry on liquor business under Rajasthan Excise Act, 1960. 'R' entered into an agreement of partnership with the other persons and formed the assessee-firm to carry on the business regarding which the licence had been granted to 'R' in his exclusive name. No prior permission from the said excise authorities was obtained by 'R' for carrying on a liquor business in partnership with others. For the relevant assessment year, the assessee applied for registration under the Act. However, the ITO was of view that as 'R' had formed a partnership with others to carry on business mentioned in the licence, it amounted to transfer of the licence in favour of other persons without prior permission of excise authorities and this contravened rule 72B of the Excise Act, which, inter alia, provided that 'no licence shall be sold or transferred without obtaining previous permission in writing from the licensing authority'. Accordingly, the ITO refused to grant registration to the assessee under section 185. On appeal, the AAC, however, allowed the registration to the assessee which was confirmed by the Tribunal. On reference by the revenue: HELD The aforesaid rule 72B only provided that the licence shall not be transferred without obtaining previous permission in writing from licensing authority. In the present case, the licence was granted to R who merely took other partners in the business. There was no prohibition of not taking partners in the…

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