Law:

Section:

section 185 of the Income-tax Act, 1961 - Firm - Registration - Genuineness of - Certain individuals were granted licence for retail sale of country liquor by Rajasthan Government under the Rajasthan Excise Act, 1950 - These licensees entered into partnership with five other persons and constituted assessee-firm which applied for its registration under section 185A though such induction made in absence of any written consent by excise department was against provisions of said Excise Act -Whether partnership entered into by inducting new partners in violation of provisions of licence was not valid and, therefore, not entitled to registration under Section 185 - Held, yes Facts The Rajasthan Government granted a licence for the retail sale of country liquor, in the joint names of M, C and B. The licensees entered into partnership with five other persons, and constituted the assessee-firm. The assessee on the basis of the deed of partnership, applied for registration of the firm, but the ITO refused registration on the ground that the partnership which violated the provisions of the licence issued by the excise department, under the Rajasthan Excise Act, 1950, was not legal. According to the provisions of the said Act the licence holder was required to obtain permission from the excise authorities before entering" into a partnership with other persons, and failure to do so, amounted to violation of the conditions of the licence. That Act further provided that infringement of any of its provisions would be punishable with imprisonment or fine or with both. On appeal, the AAC confirmed the ITO's order. On further appeal, the Tribunal also maintained the order of refusal of registration of the firm and observed that 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 violation of such public policy. On reference : Held The partnership deed, in the present case, provided that all the partners were to contribute not only their capital but also skill and labour, implying thereby that all the partners would be entitled to deal with the country liquor, which was prohibited by…

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