COMMISSIONER OF INCOME TAX Vs. UNION TOBACCO CO

JUDGEMENT

(1.) THE facts leading to the question referred to this Court, which Question has been argued with ability by the counsel of the assessee, may be shortly stated. Twelve persons have formed a partnership under a deed of 23-8-1949. Some of these partners had earlier obtained several tobacco licences for the year 1125 at the auction conducted by the then Cochin Government, and the partnership had been formed to exploit the licences obtained by the partners; ns well as two licences held by the strangers. Para 2 of the partnership deed provides that the shops, for which the lincences were held, should he run under the trade name of "Union Tobacco Company, Ernakulam" and in accordance with the terms and conditions of the deed. THE document further provides that the business should be owned by the partners in four equal shares; one share to be held by a group consisting of three oartners another by a group comprising of two: the third by another group of two partners; and the fourth share by five partners. Para 4 of the deed also provides that the profits or losses of the partnership should be divided among the 12 partners in the manner mentioned therein. Para 8 states that the closing stocks of tobacco, beedi leaves etc., held by the partners on 31-12-1124 should be taken over by the firm's Head Office either as outright purchase or for commission sales; and the cost of such goods be credited in the accounts of the partners who held them. THE other relevant provisions of the partnership deed are that the daily collections of each shop are to be sent to the Head Office on the same day, or thrice a week; are to be credited to the respective shops; and certain persons are to manage and to attend full time to the firm's business. THE details concerning the shops and which partner held what licence can best be described by giving the following extracts from paragraph 4 of the statement of case to this Court:

(2.) AT this stage it would be of advantage to quote the relevant sections of the enactment and part of the notification thereunder concerning sales of stocking of tobacco. These are Sections 4, 5 and 6 of the Cochin Tobacco Act, VII of 1084.

(3.) THE learned Advocate for the Department has urged that a contract transferring rights under the licenses and contrary to the rule contained in the notification is void, and as the partnership clearly amounts to such a contract it cannot be registered. In support of this argument the learned advocate relies on AIR 1957 Mad 186, Pannalal v. State of Hyderabad, AIR 1954 Hyd 129, and Fakirchand v. Bansilal, (S) AIR 1955 Hyd 28. In the two last mentioned cases the partnership contravened the provisions of the Abkari Act and were held to be void.