TMI Blog1965 (8) TMI 99X X X X Extracts X X X X X X X X Extracts X X X X ..... ership was constituted by a written document on July 21, 1945. The material terms of the deed of partnership are as follows: The partnership business will continue to be carried on under the name and style of Jer and Company. The duration of the partnership will be at will. The shares of the two brothers in the profits will be half and half. They will contribute towards the capital of the business equally and will be entitled to interest at a certain rate on their investment. The net profits will be determined after deducting all business expenses including depreciation, interest on investment, loans, taxes etc. The partners will devote their whole time and attention to the partnership business and will not enter into or carry on any business either alone or in partnership which is of a competitive nature. The partnership will maintain an account with a bank and it will be operated upon by either of the partners. Neither of the partners is at liberty to assign his share, right, title or interest or part of it, without the consent of the other. Account books will be kept at the place of business and each partner will be entitled to inspect them. The Excise Commissioner has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er himself liable to the cancellation of the licence. Rule 362 is about the licence in form F.L. 2. Under section 64 a licensee can be prosecuted for disobedience of a direction contained in a licence or for disobeying a rule made under section 40. Section 77 lays down that all rules made under the Act should be published in the Gazette. Section 40 requires pre-publication. Dady held the licence during the two assessment years also but the business of wholesale vending of foreign liquor at Agra was done by the partnership under the name and style of Jer and Company and not by Dady. Jer and Company had engaged an authorized salesman named Mohammad Ismail to do the actual vending. Jer and Company never obtained a licence from the Excise Commissioner for the wholesale vending of foreign liquor. The partnership was registered under section 26A of the Income-tax Act in 1945-46 and the registration was renewed from year to year up to the end of the assessment year 1959-60. The registration was renewed for the assessment year 1958-59 on September 8, 1958, and for the assessment year 1959-60 on July 10, 1959. On September 3, 1960, the Commissioner of Income-tax acting under section 33B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the name of Dady alone and that the business of vending liquor was carried on by the assessee. There is no licence obtained by the assessee to carry on the business and it is prohibited by law from carrying it on. A partnership is nothing but the partners taken collectively; the assessee is Dady and Minoo taken together. But there is a distinction between Dady alone and Dady and Minoo taken collectively as a partnership; Dady alone cannot be said to be identical completely with Dady and Minoo. The business is carried on by the assessee by virtue of the licence issued in the name of Dady; it is not its case that it is carrying it on without any licence. It relies upon the licence issued to Dady as the authority for its carrying it on. Dady himself has permitted the business to be carried on by it. Lastly, the licensed business had to be carried on. These facts established beyond any doubt that he has transferred the licence to the assessee. He himself has allowed the assessee to use the licence and if this does not mean that he has transferred it to the assessee I do not know what else it means. The only object behind transfer of a licence by the licensee to another person is to ena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no precedent for a case under another Act or Rule. In the case of J.D. Italia A.I.R. 1944 Mad. 295 it was found as a matter of fact that the authorities were aware of the existence of the partnership before the licence was issued; they had actually turned down the request to issue the licence in the name of the partnership. There is no finding here that not only the Collector but also the Excise Commissioner knew that the business was to be carried on by the assessee even though the licence was issued in the name of Dady. The Tribunal's finding that it is too much to believe the excise authorities did not know about this is not a definite finding and the words the excise authorities are too vague to include necessarily the Excise Commissioner. Moreover, while permission to do an act may be inferred from the knowledge that the act was being, or was intended to be, done, sanction requires a positive act on the part of the authority having power to sanction and may not be inferred in a like manner. Further, all that has been found by the Tribunal is that there was knowledge, not that it was derived from disclosures made by Dady. It is quite likely that the excise authoriti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of the licence or even to entering into partnership for carrying on the business. Therefore, the decisions in the cases of Shiam Behari Lal, etc., are of no avail. In the cases of Chandaji Sukhraj Co. A.I.R. 1960 A.P. 444 and K.C.S. Reddy [1960] 38 I.T.R. 560 the licensee entered into a partnership with others for carrying on the licensed business and it was held that the partnership was not invalid. In the case of Chandaji Sukhraj Co. A.I.R. 1960 A.P. 444 there was no prohibition on the licensee's entering into partnership with others; he was only required to report the fact to the licensing authority within a certain time. If a licensee entered into a partnership and informed the licensing authority of the fact, there is no question of there being anything wrong; but even if he did not inform the licensing authority of the fact, the only wrong committed by him is the failure to inform it and this failure could have no effect on the validity of the partnership. He may be liable for the failure but not for entering into the partnership at all. The view taken in the case of K.C.S. Reddy [1960] 38 I.T.R. 560 was that a partnership is not a person within t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ming of the partnership. The forming of the partnership itself does not comprehend the transfer and I respectfully agree with what was said in the case of Chandaji Sukhraj Co.# In Gauri Shankar v. Mumtaz Ali Khan [1878-1880] I.L.R. 2 ALL. 411 the facts were that Mumtaz Ali Khan took a ferry on lease from the Government agreeing not to sub-let it and then entered into partnership with another person to run the ferry and it was held that the contract between him and the other person was valid and an action could be maintained on it. The lease prohibited only a sub-lease or a transfer but not a partnership; this was the ratio decidendi of the decision. The question arose between Mumtaz Ali Khan and his partner and not between Mumtaz Ali Khan and the Government, a stranger to the partnership. Further, the question whether a lessee's entering into partnership amounts to a sub-lease or transfer of the lease is not quite the same as the question whether a licensee's entering into partnership amounts to transfer of the licence or not, because a licence in its very nature is personal, no business can be carried on without a licence and the licensed business must be carried on. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at he has in favour of another, and thereby does what the rule seeks to forbid...by becoming a partner a licensee...converts without transfer of corpus his possession into that of an agent. The vicarious possession is then substantially different and the rule against transfer is attracted. In Benarasi Das Co.'s case [1962] 44 I.T.R. 835 a person obtained a licence for dealing in opium and subsequently entered into partnership with others to run the business and the partnership was declared to be illegal. Similar were the facts in the case of Krishna Reddy [1962] 46 I.T.R. 784 and the Andhra Pradesh High Court held the partnership to be void. In the result my finding is that the assessee-partnership was invalid because it was formed with the avowed object of carrying on the business of wholesale vend in foreign liquor without a licence in its favour. The object of the partnership was to carry on the business on the authority of the licence issued in the name of Dady and transferred by him to the partnership against the provisions of the Excise Act and Rules. Thus it was to carry on the business against the provisions of the Excise Act and Rules and consequently ..... X X X X Extracts X X X X X X X X Extracts X X X X
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