TMI Blog1968 (11) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... rse, the firm named Prakash Ram Gupta applied under section 26A of the Income-tax Act, 1922, for registration of the firm for the assessment year 1950-60. This application was rejected by the Income-tax Officer by an order dated the 29th February, 1960. It was held that by the partnership deed Sri Prakash Ram Gupta sought to transfer the business of the firm and as the excise law prohibited such a transfer of licence the firm did not have any legal existence and it cannot be recognised. For the assessment year 1960-61 the firm named Prakash Ram Gupta had again applied for registration under the same provision of law and this was also refused by the Income-tax Officer by his order dated the 24th January, 1961. By this order it was held that the licensee was Sri Prakash Ram Gupta and, as the excise law prohibited transfer of a licence from one person to another, the transfer by Sri Gupta to a firm consisting of himself and Sri Mahadeo Ram was illegal. The assessee-firm went up in appeal with respect to the assessment year 1959-60 and by order dated the 19th July, 1960, the appeal was dismissed. It was held by the Appellate Assistant Commissioner that the transfer of licence by Sri Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Tribunal, Patna Bench, allowed them by a consolidated judgment dated the 10th July, 1964, directing that the appellant-firm should be registered for both the years 1959-60 and 1960-61. The reasons given by the Appellate Assistant Commissioner for refusing registration were not accepted to be valid reasons, Thereafter, the Commissioner of Income-tax, Bihar and Orissa, Patna, applied under section 66(1) of the Indian Income-tax Act, 1922, in these two cases for referring the questions of law arising on the facts and circumstances of the two cases to this court and the reference has thus arisen. In order to appreciate the contentions raised by the parties in these two cases, the following clauses of the deed of partnership dated the 21st November, 1959, are quoted : (The first party refers to Sri Prakash Ram Gupta and the second party refers to Sri Mahadeo Ram). " 1. The first party above named has obtained the necessary excise licence in his name to carry on the business of sale of country liquor at Bararee and Pachwai at Bhagatdin. 2. The said business will be carried on under the name of the first party from its head office at Jharia with shops or branches at Bararee and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cturing, or supplying wholesale, or (b) of manufacturing and supplying wholesale, or (c) of selling wholesale or retail, or (d) of manufacturing or supplying wholesale and selling retail, or (e) of manufacturing and supplying wholesale and selling retail any country liquor or intoxicating drug within any specified local area : Provided that such public notice shall be given of the intention to grant any such exclusive privilege, and that any objection made by any person residing within the area affected shall be considered before an exclusive privilege is granted. (2) No grantee of any privilege under sub-section (1) shall exercise the same unless or until he has received a licence in that behalf from the Collector or the Excise Commissioner. " " 23. Transfer of exclusive Privilege.-(1) A grantee of an exclusive privilege under section 22 shall not let or assign the same or any portion thereof unless he is expressly authorized, by a condition made under that section, to do so. (2) Such letting or assignment shall be made only to a person approved by the Collector or (if the letting or assignment extends to more than one district) the Excise Commissioner. (3) The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner of Income-tax . In my opinion, Mohapatra Bhandar's case is distinguishable on facts and the principle applied by the learned judges of the Orissa High Court will not apply on the terms of the partnership deed of these cases. The learned judges stated as follows : " This finding clearly shows that the firm did not merely take over the financial part of the business but the entire business including its management. The business here consists merely in storing and selling excisable goods like opium and ganja and when the income-tax authorities have categorically held that this business was handed over by the licensee to the firm and the firm managed this business during the year in question, it must be held that there was a complete transfer of the business against the provisions of the excise rules prevailing in the State. " Then the learned judges, after distinguishing a decision of this court in the case of Commissioner of Income-tax v. K. C. S. Reddy, stated that the partnership deed of Mohapatra Bhandar's case showed that the firm carried on " business ", which would necessarily mean securing, possessing and selling of excisable articles in question. The distinction b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed judges of the Madras High Court is obliterated by the decision of their Lordships of the Supreme Court in Umacharam Shaw's case. In D. Mohideen's case the learned judges of the Madras High Court referred to the Full Bench decision and stated that the Full Bench decision of that court held that a partnership entered into for the purpose of conducting a business in arrack or toddy on a licence granted to only one or some of the partners was void ab initio, because such partnership arranement involved a transfer of the licence or was a bench of the Abkari Act punishable under that Act, because the unlicensed partner, by himself, or through his agent, the other partner, sells without a licence. The argument of Sri Sen is based on the decision of their Lordships of the Supreme Court. Challenging the correctness of the decisions of the Madras High Court cannot be said to be without force and Sri Sen has drawn our attention to a decision of the Andhra Pradesh High Court in the case of Chandaji Sukhraj Co. v. Lal and Co., where the Full Bench decision of the Madras High Court was not accepted as correct. Sri Sen has also relied upon a decision of the Bombay High Court in the case of C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... went on the broad principle as to the significance of the prohibition of the transfer of licences. In Champsey Dossa's case a licensee was not authorised to sub-let, sell, mortgage or otherwise alienate, in whole or in part, the privilege granted under a licence, without the written permission of the Collector ; nevertheless, some members of the family and others were taken in partnership and the Bombay High Court held that the admission of the partner to a share in the profit cannot be considered as sub-letting or alienation unless there was a document directly transferring to the partners or attempting to transfer to the partners a part of the right to manufacture or vend. In the instant cases, as stated earlier, clause (7) of the partnership deed compelled Sri Ram to observe the rules and regulations of the Excise Act and, therefore, he cannot possibly claim to sell licensed commodity, as he himself was not a licensee, and, therefore, on the broad principle, I am inclined to agree with the principle laid down by the learned judges of the Andhra Pradesh High Court. In Champsey Dossa's case the learned judges of the Bombay High Court stated thus : " The admission of partners to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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