COMMISSIONER OF INCOME TAX Vs. GUPTA AND CO

JUDGEMENT

(1.) THIS is a reference made by the Tribunal referring for our answer the following question of law:

(2.) THE facts briefly stated are that excise contracts of four liquor shops were taken in the State of Orissa in the names of two partners of the assessee firm. THE assessee firm derived income from those excise contracts in the account year relevant to the asst. yr. 1974-75. THE assessee firm applied for registration. THE registration was refused by the ITO on the ground that the excise contracts were not transferable having been obtained in the names of two out of four partners of the firm. It was further held that the formation of the partnership in respect of such non- transferable licences was in contravention of law. THE basis of the decision to refuse registration was the Madhya Pradesh Excise Act and the Rules made thereunder. THE view taken was that as the head office of the firm was in Madhya Pradesh, the laws of Madhya Pradesh were applicable. THE AAC set aside the order of the ITO and granted registration. THE order of the AAC was upheld by the Tribunal. THE Tribunal, took the view and, in our opinion, rightly that as the excise contracts were to be worked in the State of Orissa, it is the law of that State which will decide whether the contracts were transferable and whether the taking of partners by a licensee was prohibited. THE Tribunal had expressed the same view in Kondra Durgaioya's case which was approved by this Court. THE judgment of this Court is now reported as CIT vs. Kondra Durgaiya (1981) 21 CTR (MP) 164. It was held by the High Court in that case that simply because the head office of the firm was in Madhya Pradesh, the Madhya Pradesh Excise Act and the Rules made thereunder were not applicable and the liquor contracts having been taken in the State of Orissa, it was the law in force in that State which governed the transferability of the contracts. It was also held that the excise law in force in Orissa State did not prohibit a licensee from taking partners for working the licences.