COMMISSIONER OF INCOME TAX Vs. CHUNILAL

JUDGEMENT

(1.) THIS reference under Section 256(1) of the Income-tax Act, 1961, (for short "the Act" hereinafter), is at the instance of the Revenue for deciding the following question of law, namely:

(2.) THE relevant assessment year is 1973-74 corresponding to the financial year 1972-73. THE assessee was a firm consisting of six partners constituted by an instrument of partnership executed on September 5, 1972. It derived income from sale of country liquor. A licence for sale of country liquor had been taken in the name of one of its partners, namely, Chunnilal Tak. According to the terms of the partnership, the business of selling country liquor under the said licence was to be treated as property of all the partners of this firm. It was also agreed between them that the management of the business in sale of country liquor was to be done by Chunnilal Tak while the other partners were permitted access to the account books. THE firm applied for registration under the Act. THE Income-tax Officer held that such a partnership for carrying on business in country liquor was invalid since it was formed without the permission of the excise authorities in infringement of one of the conditions of the licence reading as under :

(3.) NO costs.