COMMISSIONER OF INCOME TAX Vs. SUJANKHAN LALOO KHAN

JUDGEMENT

(1.) THE Tribunal, Jaipur Bench, Jaipur, has referred the following question of law for the opinion of this court :

(2.) THEKA Sharab, Ajmeri Gate, Jaipur, consisting of two partners, was granted a liquor contract for Jaipur district. Sujankhan, one of the partners in THEKA Sharab, Ajmeri Gate, Jaipur, constituted a sub-partnership firm, Sujankhan Laloo Khan, consisting of Sujankhan Laloo Khan, Razaq Khan and Badroo Khan. This partnership was constituted with effect from April 1, 1974, by a deed which was drawn up on February 26, 1975. The names and shares in the profit and loss of the sub-partnership business are stated to be as under :

(3.) LEARNED counsel for the respondent, on the other hand, contended that the business of the main firm is different from the sub-partnership and the three partners of the sub-partnership firm have nothing to do with the main firm and its business and the business of the sub-partnership is only to finance one of the partners of the main firm who is doing business in liquor along with the other partner(s) at Jaipur in the name and style of "Theka Sharab, Ajmeri Gate, Jaipur", and , therefore, the provisions of the Rajasthan Excise Act have nothing to do with the distribution of the profits of the excise business after allotment of the same to the share of a partner and the sub-partnership is neither illegal nor void and the sub-partnership firm is, therefore, entitled to registration. LEARNED counsel for the respondent has tried to distinguish the Full Bench decision of this court on the above lines. He has further submitted that the partner(s) of the main registered firm can enjoy the entire income of the firm himself, or, in the alternative, can divert his income or loss to other persons, may be relatives or strangers, provided they agree to be sub-partners by constituting a sub-partnership firm. In support of his case, learned counsel for the respondent has placed reliance on R. C. Mitter and Sons v. CIT [1959] 36 ITR 194 (SC), CIT v. Sivakasi Match Exporting Co. [1964] 53 ITR 204 (SC), Murlidhar Himatsingha v. CIT [1966] 62 ITR 323 (SC), CIT v. R.B. Jodha Mal Kuthiala and Co. [1970] 77 ITR 341 (P & H) and Addl. CIT v. Degaon Gangareddy G. Ramhishan and Co, [1978] 111 ITR 93 (AP).