9911796707
TMI Blog1995 (3) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... The impugned judgment of the High Court is Addl. CIT v. Degaon Gangareddy G. Ramkishan and Co. [1978] 111 ITR 93. The decision of the High Court was rendered in a reference made by the Income-tax Appellate Tribunal, Hyderabad Bench, under section 256(1) of the Income-tax Act, 1961, at the instance of the Revenue for opinion on the following question of law, namely : " Whether, on the facts and in the circumstances of the case, the sub-partnerships are entitled to the benefits of registration under the Income-tax Act, 1961, for the assessment year 1964-65 ? " The High Court answered the question in the affirmative, in favour of the assessee and against the Revenue. Hence, this appeal by the Revenue on a certificate granted by the High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... members of the subpartnership except Ganga Goud were not licenceholders under the Abkari Act. On appeal, the Appellate Assistant Commissioner upheld the order of the assessing authority taking the view that registration of the subpartnership would defeat the purpose of the Abkari Act. Similar applications for registration under the Income-tax Act by six other sub-partnerships formed by different partners of the main partnership with others were rejected by the assessing authority and their appeals were also dismissed by the Appellate Assistant Commissioner. All these seven sub-partnerships preferred further appeals to the Income-tax Appellate Tribunal. On a construction of the terms of the deed constituting the sub-partnerships, the Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als in liquor .... or any other prohibited article which requires a specific permission of the State Government .... can validly enter into a sub-partnership with strangers in respect of his share in the main partnership. This question arises because of the prohibition contained in section 14 of the Abkari Act against carrying on business in liquor without a licence granted for the purpose. The High Court rightly pointed out that the partners of the sub-partnership would not become partners of the main partnership-firm and this position would not be altered in any manner even if the business of the main firm were to deal in liquor or any other prohibited article since the partners of the sub-partnership would be entitled only to share the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, the High Court referred to the contents of the deed of sub-partnership and the finding of the Tribunal that the assessee-sub-partnership cannot be said to have not carried on any business ; that the sub-partnership had financed and owned the capital invested by one of its partners in the main firm ; and that the sub-partnership had been formed mainly to finance the business of one of the partners of the main firm doing abkari business and share the profits and losses accruing to or received by him from the main firm. The High Court also observed that the sub-partnership confined its business to only sharing the profits earned by one of the partners of the main partnership doing abkari business in lieu of their capital invested for the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erships formed by individual partners of the main partnership which were lessees, with some others, merely to finance the business of a partner of the main firm doing abkari business and share the profits and losses accrued to or received by him from the main firm, were not in violation of section 14 of the Abkari Act. For this reason, there is no basis to hold that the sub-partnerships were in violation of section 14 of the Abkari Act and, therefore, illegal. The Tribunal was right in holding that in the facts and circumstances of the case, the assessee-sub-partnerships being found to be genuine were entitled to be registered under the Income-tax Act. The High Court has correctly answered the question of law referred to it, against the Rev ..... X X X X Extracts X X X X X X X X Extracts X X X X
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