NARSAIYA AND COMPANY Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference under Section 256(1) of the I.T. Act, 1961, referring for our answer the following questions of law :

(2.) THE material facts are that one Narsaiya took five liquor contracts on 21st July, 1967, on payment of Rs. 2,39,400. On 1st September, 1967, Narsaiya executed a deed of partnership along with another Narsaiya, son of Mallahiya, for carrying on the above liquor business THE firm sought registration under Section 184 of the I.T. Act. THE ITO rejected the application for registration on the ground that the partnership was entered into without the prior permission of the Collector and it was illegal. THE same view was taken by the AAC. THE Tribunal also took the same view. Before the Tribunal the assessee produced a certificate dated 15th January, 1968, issued by the District Excise Officer which reads as follows:

(3.) THE licences granted under the Excise Rules contain a condition that the licensee is bound by the General Licence Conditions prescribed by the Rules. Section 39 of the Act makes any act done in breach of any of the conditions of the licence punishable as a criminal offence. THE consistent view of this court right from 1937 is that an agreement of partnership in liquor contract entered in violation of Rule 6, i.e., without the permission of the Collector and without the permission being endorsed on the licence is void ab initio (See Nandlal v. Thomas J. William, AIR 1937 Hag 250, CIT v. Pagoda Hotel and Restaurant [1974] 93 ITR 271 (MP) and C1T v. Sheonarayan Harnarayan [1975] 100 ITR 213 (MP)). Learned counsel for the assessee submitted before us that on the basis of the certificate issued by the District Excise Officer it ought to have been held by the Tribunal that the permission applied for was granted by the Collector and the condition of Rule 6 was substantially complied with. We are unable to agree with this submission. Rule 6, on a plain reading, requires the written permission of the Collector. It further requires that permission be endorsed on the licence. THE District Excise Officer is not the Collector. THE certificate issued by the former does not say that permission was granted by the Collector. Even assuming that the District Excise Officer permitted the formation of the partnership after receiving the intimation from the assessee, it does not satisfy the requirement of Rule 6. If the assessee's case was that permission was really granted by the Collector as required by the rule, the assessee should have produced a certified copy of the permission which was not done. THE certificate issued by the District Excise Officer is of no help to the assessee. In our opinion, therefore, the Tribunal was right in holding, that the written permission of the Collector required by Rule 6 was not obtained and that no such permission was endorsed on the licence.