Law: Income Tax Act, 1961

Section: 185

Income-tax-----Firm---Registration---Liquor Business---Only some partners holding liquor licence---Contrary to basic principle and not legal---Firm not entitled to be registered---Indian Income Tax Act, 1961, S.185. The basic principle is that liquor business is res extra commercium. No one may deal in liquor without express permission. It is only the licensee who is granted such permission. If he enters into a partnership to deal in liquor, all the other partners would, as partners, also be dealing in liquor and holding the same. This would be contrary to the basic principle and illegal. Held accordingly, that the assessee firm, which dealt in liquor, was not entitled to registration under section 185 of the Income Tax Act, 1961, as only some of its partners held the liquor licence. CIT (Addl.) v. Degaon Ganga Reddy G. Ramkrishna & Co. (1995) 214 ITR 650 (SC) distinguished. Bihari Lal Jaiswal v. CIT (1996) 217 ITR 746 (SC) and CIT v. Hardit Singh Pal Chand & Co.(1979) 120 ITR 289 (P&H) fol. ORDER The Revenue is in appeal against the order of a Division Bench of the High Court of Himachal Pradesh. Thereby, the High Court answered against the Revenue the following question: "Whether, in the facts and circumstances of the case, the Appellate Tribunal was right in law in ordering that the claim of the assessee-firm for registration under section 185 of the Income Tax Act, 1961, be accepted?" It did so relying upon an earlier judgment. The question arose out of an order made by the Income-tax Appellate Tribunal which had held that the registration of the partnership in question under the Income-tax Act had not been rightly refused. The partnership (the assessee) dealt in liquor. Only some of the partners held the liquor licence. Our attention was drawn by the learned Solicitor-General, appearing for the Revenue, to the judgment of this Court in Bihari Lal Jaiswal v. CIT (1996) 217 ITR 746. It was held that a licensee could not be "permitted to bring in strangers into the business, which would-mean that instead of the licensee carrying on the business, it would be carried on by others a situation not conducive to effective implementation of the excise…

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