COMMISSIONER OF INCOME TAX Vs. KISHORE AND CO.

JUDGEMENT

(1.) The present appeal came to be admitted on the following substantial question of law:-

(2.) Aggrieved by the same, Revenue is before this Court. According to Mr. Raviraj, arguing for the Revenue, when once contravention of Karnataka Exercise License (General Conditions Rules) is apparent, the very partnership firm cannot be considered as a legally constituted partnership firm. Therefore, in view of the violation of the Rules especially Rule 17(b), where transfer of license is prohibited without prior permission of the Deputy Commissioner of Excise, the respondent Assessee was not entitled for any allowance as claimed in the returns. He relies upon the decision in the case of CIT v. Rangila Ram, 2002 254 ITR 230. He also places reliance on an unreported decision of this Court in ITA Nos. 191/2007 and 199/2007.

(3.) From the orders of the Assessing Officer pertaining to this assessment year, we note that subsequent to amendment of Income-tax Act, with effect from 1-4-1993 fresh partnership deed was drawn between the partners and the respondent firm was filing the returns claiming allowance on behalf of the partnership firm. Unfortunately, we do not have the benefit of going through the different terms of partnership deed. In the case of Rangila Ram , the Apex Court stated that, when licensee alone is granted permission to deal with liquor and by virtue of such license if he entered into partnership with others to deal with any liquor, it would amount to all other partners also dealing in liquor. This would be contrary to the basic principle and illegal, as without license other partners were not entitled to carry on the business of liquor.