9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
1973 (9) TMI 19 - HC - Income TaxFirm registration - licence for trade in liquor is in the names of some of the partners - Whether on the facts and in the circumstances of the case the assessee-firm was entitled to registration under the Income-tax Act for the assessment years 1958-59 and 1959-60 ?
Issues Involved
1. Entitlement of the assessee-firm to registration under the Indian Income-tax Act, 1922, for the assessment years 1958-59 and 1959-60. Detailed Analysis Entitlement to Registration The primary issue in this case was whether the assessee-firm was entitled to registration under the Indian Income-tax Act, 1922, for the assessment years 1958-59 and 1959-60. The assessee-firm, a dealer in country liquor, applied for registration under Section 26A of the Act. The firm consisted of seven partners, of whom only three held the necessary excise licenses under the Bihar and Orissa Excise Act, 1915. Initial Refusal and Appeals The Income-tax Officer initially refused the registration, a decision upheld by the Appellate Assistant Commissioner. The matter was then taken to the Income-tax Appellate Tribunal, which remanded the case back to the Appellate Assistant Commissioner for further findings on specific points. Tribunal's Directions The Tribunal directed the Appellate Assistant Commissioner to ascertain: 1. Whether the excise license had been transferred to the partnership. 2. Whether the license fee was charged as an expense of the partnership. 3. Whether the stock of liquor belonged to the firm, giving all partners an interest. 4. Whether the non-licensee partners could manage the liquor business. Findings on Remand The Income-tax Officer reported that the excise license had not been transferred to the partnership, the license fees were charged as partnership expenses, and the stock of liquor belonged to the firm. However, it was unclear whether non-licensee partners could manage the liquor business. The Appellate Assistant Commissioner accepted these findings, except for the management aspect, and directed the Income-tax Officer to register the firm. Tribunal's Final Decision The Tribunal held that the licenses had not been transferred to the partnership and there was no de facto transfer or assignment of the excise licenses in favor of the partnership. The Tribunal thus referred the question of law to the High Court. High Court's Analysis The High Court examined the settled legal propositions, noting that while a license may be in the name of one or more persons, there is no statutory bar against forming a partnership for carrying on the business founded upon such a license. The Court distinguished between the illegality of a partnership agreement and illegal acts committed during the business. It held that registration could not be refused merely because some partners committed illegalities during the business. Relevant Precedents The Court referred to several precedents: - Dayabhai & Co. v. Commissioner of Income-tax: Distinguished between illegal partnership agreements and illegal acts during business. - Commissioner of Income-tax v. K. C. S. Reddy: Held that a partnership agreement was valid even if the license was in the name of one partner. - Umacharan Shaw & Bros. v. Commissioner of Income-tax: Upheld the validity of a partnership agreement where licenses were held by individual partners. The Court also distinguished the cases relied upon by the revenue, noting that those cases either assumed a transfer of the license or involved statutory bars against forming partnerships. Conclusion The High Court concluded that the assessee-firm was entitled to registration under the Indian Income-tax Act, 1922, for the assessment years 1958-59 and 1959-60. The Court decided the question of law in the affirmative and awarded costs to the assessee. Summary The High Court held that the assessee-firm was entitled to registration under the Indian Income-tax Act, 1922, for the assessment years 1958-59 and 1959-60. The Court distinguished between the illegality of a partnership agreement and illegal acts committed during the business, and found no statutory bar against forming a partnership for carrying on a business founded upon an excise license. The Court awarded costs to the assessee.
|
