TMI Blog1968 (11) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... "Whether, on the facts and circumstances of the case, the assessee firm was entitled to registration under section 26A of the Income-tax Act for the assessment years 1959-60 and 1960-61 ? " The relevant facts are as follows: The assessee firm was constituted under a deed of partnership dated the 4th December, 1958, and comprised of four partners, who had shares in the profits and losses of the business in equal proportion. The capital was fixed at Rs. 26,000, to be contributed equally by the partners. The preamble of the partnership deed provided as follows: (The first party mentioned in the preamble referred to Sri Nakul Chandra Mandal). " Whereas the parties have taken in the name of the 1st party licence of eight pachwai shops, viz. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 15th September, 1960. It was held that the constitution of the partnership between Sri N. C. Mandal, the licensee, and the other three partners had amounted to a sub-lease and hence the formation of the partnership was illegal. This has given rise to Tax Case No. 49 of 1966 in this court. The two sections of the Bihar and Orissa Excise Act, 1915 (Act No. II of 1915), which govern the matter, run, as follows : " Section 22.-Grant of exclusive privilege of manufacture and sale of country liquor or intoxicating drugs.--(1) The State Government may grant to any person, on such conditions and for such period as it may think fit, the exclusive privilege-- (a) of manufacturing or supplying wholesale, or (b) of manufacturing and supplyin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was in effect a sub-letting of the licence taken by Sri N. C. Mandal. By order dated the 28th December, 1961, the Income-tax Appellate Tribunal, Patna Bench, did not accept the view of the Appellate Assistant Commissioner and reminded the case for a fresh decision. After referring to several cases on the point including that of Commissioner of Income-tax v. K. C. S. Reddy of this court, the Appellate Tribunal stated thus : " Before deciding whether a valid partnership exists or not there has to be a proper finding of fact as to whether the excise licences obtained by N. C. Mandal have been transferred to the partnership. This is a matter which has to be determined not only on interpretation of the terms of the partnership deed but also w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty being the same Sri Nakul Chandra Mandal. Apart from the date and the details as to the amounts contributed by the four partners, the principal clauses were the same as in the earlier deed, the name and style of the partnership being Messrs. N. C. Mandal Company. Clause 10 of this deed stated thus : " 10. The first party shall manage the partnership business subject to general supervision of the other partners and by way of remuneration for the service to be rendered by the first party he shall be entitled to a salary of Rs. 200 (two hundred) per month in addition to his share of profit. " The Income-tax Officer refused registration under this deed by big order dated the 22nd February, 1961. It was held that the partnership deed w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of this court is that in the case of Commissioner of Income-tax v. K.C.S. Reddy, the business was to run in the name of the licensee, whereas in the instant cases the business was to run not in the name of Sri N.C. Mandal but in the name of N. C. Mandal Company. I do not think that this distinction makes any difference in the principle laid down by this court. The case in Commissioner of Income-tax v. K. C. S. Reddy was under the Bihar Mica Act, 1948, and it arose out of an application filed for registration under section 26A of the Income-tax Act. As held in that case, there is also no express prohibition in the Excise Act that a partnership cannot carry on business of dealing in excisable articles, provided, of course, the person who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance of this contention. If all the four partners were licensees, then so far as section 26A of the Indian Income-tax Act, 1922, is concerned, there could not have been any objection to the registration of the firm, unless the very formation of a firm is held to be illegal. But there is nothing in the Excise Act prohibiting formation of a firm for running a business of excisable commodities. In any case, this is not a point which had been urged before the Income-tax Appellate Tribunal for refusing registration of the firm in these two cases. For the reasons given earlier, the answer to the reference must be that the assessee firm was entitled to registration under section 26A of the Indian Income-tax Act, 1922, for the assessment years 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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