ALL ASIA ENTERPRISES Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE following common questions have been referred at the instance of the assessee for the asst. yrs. 1981-82, 1982-83 and 1983-84 : Page 1 of 3CTR 24/12/2010file://C:\PROGRAM FILES\html\matter3.htm

(2.) THE assessee-firm carried on the business in liquor. The firm was constituted on 1st April, 1980. Licence to sell foreign liquor and bear on wholesale basis was granted to the firm for the period 27th June, 1980 to 31st March, 1981. Thereafter, licence was renewed from year to year. For the asst. yr. 1981-82, registration to the firm was refused by the ITO, after noticing that there was a change in the constitution of the firm from 5th Aug., 1980, when two new partners were added. The firm had been first constituted by four partners to carry on the business under L-1 licence. There was another change in the firm on 20th Oct., 1980, when two more partners were added, thus, raising the strength to eight partners. Since the names of the partners, other than the four original partners, were not entered in the licence, the ITO refused registration to the firm. For the asst. yr. 1982-83, application for registration was filed in Form No. 11 in the month of March, 1982 along with the partnership deed executed on 5th April, 1981. The firm, in this year also, carried on the business in liquor. The business was carried on upto 31st March, 1981 under the partnership deed executed on 20th Oct., 1980. There was a change in the partnership w.e.f. 1st April, 1981, when two existing partners retired and four new partners joined the firm, thus, raising the total number of partners to ten. The ITO noticed that L-1 licence had been first issued on 27th June, 1980 to four partners only and, thereafter, new partners had been added from time to time. Since the names of the new partners had not been entered in the licence granted to the firm, the ITO, following the decision of this Court in CIT vs. Hardit Singh Pal Chand & Co. (1979) 8 CTR (P&H) 365 : (1979) 120 ITR 289 (P&H) : TC 33R.1043, refused registration. For the asst. yr. 1983-84, declaration in Form No. 12 was filed along with the return. Though, there was no change in the constitution of the firm in this year, registration was not granted on the ground that in the earlier years registration had been refused on account of the addition of new partners. The ITO noticed that the names of all the partners had not been entered in the liquor licence obtained for this year inasmuch as the licence continued in the names of the four partners who had joined the partnership in the beginning. The number of the partners had since increased to ten but the licence continued in the names of four partners only.

(3.) THE question which actually arises for consideration is whether registration can be refused to a partnership firm under S. 185(1) of the IT Act on the ground that the person or persons holding licence to run a business in liquor had constituted such firm by adding more persons as partners without permission from the competent authority under the Punjab Excise Act and the rules framed thereunder.