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TMI Blog1968 (1) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... rument of partnership dated October 10, 1940. Three brothers are partners of the firm. The assessment year is 1958-59. The firm was being registered for some time. On finding that there was no change in the constitution during the year under assessment, the Income-tax Officer granted renewal of registration for the relevant assessment year 1958-59. The Commissioner of Income-tax thought that renewal of registration was erroneous. Acting under section 33B of the Income-tax Act, 1922, he cancelled the registration. The assessee appealed. The appeal was dismissed by the Income-tax Appellate Tribunal, Allahabad. Upon an application by the assessee, the Tribunal has referred to the court the question of law quoted above. The ground for cancell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ying on a business under the name and style of Oudh Cocogem and Provision Stores, Hazratganj, Lucknow, since the year One Thousand Nine Hundred Thirty Four in partnership dealing in oilman stores, provisions, packed medicines, wines, etc. " Later, it was mentioned under the articles of partnership that the partners would carry on business and continue the existing business with such additions and alterations as might be deemed fit from time to time. It was clearly indicated in the deed that the firm would continue to carry on business in wines, etc., as before. We have examined the U.P. Excise Rules, which were in force in the year 1940. Rule 322 dealt with the transfers and sub-leases or licences. In sub-rule (2A) of rule 322 it was laid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defines unlawful considerations and objects. The consideration or object of an agreement is unlawful if it is forbidden by law or is of such a nature that, if permitted, it would defeat the provisions of any law. In the present case the three partners planned to sell wines in the name of the firm. That plan was likely to defeat the provisions of U.P. Excise Rules. That object of the agreement was, therefore, unlawful. It is further mentioned in section 23 of the Contract Act that every agree. ment, of which the object or consideration is unlawful, is void. Mr. Gopal Behari appearing for the department strongly relies upon section 24 of the Contract Act. Section 24 of the Contract Act states : " 24. If any part of a single consideration f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legal. It was held that the fact that some of its rules are illegal as being in restraint of trade does not constitute the society an illegal society. In Pickering v. Ilfracombe Railway Company it was observed on page 250 that the general rule is that where you cannot sever illegal from the legal part of covenant, the contract is altogether void ; but where you can sever them, whether the illegality be created by statute or by common law, you may reject the bad part and retain the good. Section 41 of the Indian Partnership Act deals with dissolution of firms. A firm is dissolved under certain circumstances. The proviso to section 41 of the Partnership Act states : " Provided that, where more than one separate adventure or undertaking is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to provisions and medicines. The deed of partnership is not void. The deed is valid in so far as the partners proposed to sell stores, provisions and packed medicines. Lastly, Mr. Gopal Behari faintly suggested that registration or its renewal is merely a privilege, and not a right. This question hardly arises out of the question of law referred to the court by the Tribunal. The Tribunal upheld the cancellation of renewal of registration simply on the ground that the deed of partnership is void, and no firm came into existence. That reasoning must fail, if it is held that the deed of partnership is partly valid, and a firm was constituted under the deed of partnership. Section 26A of the Indian Income-tax Act, 1922, laid down the procedur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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