Shankarlal Prithviraj vs Commissioner of Income Tax

G.G. Sohani, Actg. C.J.

By this reference u/s 256(2) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"), the Income Tax Appellate Tribunal, Indore Bench, Indore, has referred the following questions of law to this court for its opinion ;

"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in upholding the cancellation of registration granted to the assessee for the assessment years 1975-76, 1976-77, 1977-78 and 1978-79 for breach of the M. P. Excise Rules ?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in upholding the refusal of registration to the assessee-firm for the assessment years 1979-80 and 1980-81 for breach of the M. P. Excise Rules ?

(3) Whether, on the facts and in the circumstances of the case, the Tribunal was right in rejecting the assessee''s contention that Shankarlal/ Kamlabai did not actually participate in the carrying out of the privilege granted under the liquor licence to Prithviraj ?"

The material facts giving rise to this reference, briefly, are as follows : The assessee is a partnership firm carrying on business as a liquor contractor, The excise licence for the assessment years in question was obtained by one Prithviraj, one of the partners of the assessee, in his own name. The Income Tax Officer held that Rule 6 of the Madhya Pradesh Excise Rules prohibited a licensee from entering into a partnership with others. The Income Tax Officer, therefore, cancelled the registration of the assessee-firm for the assessment years 1975-76, 1976-77, 1977-78 and 1978-79. He also refused registration to the newly constituted firm for the years 1979-80 and 1980-81. Aggrieved by the order passed by the Income Tax Officer, the assessee preferred an appeal before the Appellate Assistant Commissioner who dismissed the appeal. On further appeal before the Tribunal, the Tribunal upheld the order passed by the Income Tax Officer and dismissed the appeal preferred by the assessee. Aggrieved by the order passed by the Tribunal, the assessee sought a reference and it is at the instance of the assessee that the aforesaid questions of law have been referred to this court for its opinion.

As regards questions NOS. (1) find (2) the matter is concluded by the decision of this court in Commissioner of Income Tax Vs. Pagoda Hotel and Restaurant, , Commissioner of Income Tax Vs. Sheonarayan Harnarayan, and Narsaiya and Co. Vs. Commissioner of Income Tax, . In Commissioner of Income Tax Vs. Pagoda Hotel and Restaurant, , a Division Bench of this court has held that in view of the provisions of Rule VI of the C. P. Excise Rules relating to conditions of licences, partnership in liquor shops was illegal and the partnership firm could not be registered under the Income Tax Act. Following that decision, two other Division Bench decisions reported in Commissioner of Income Tax Vs. Sheonarayan Harnarayan, and Nandlal Khajanmal Chhatri v. Thomas J. William AIR 1937 Nag 250, have also taken the same view. We see no reason to take a view different from that taken in the aforesaid decisions. In our opinion, therefore, the Tribunal was right in upholding the cancellation of the registration of the assessee-firm for the assessment years 1975-76, 1976-77, 1977-78 and 1978-79. The Tribunal was also right in refusing registration to the firm for the assessment years 1979-80 and 1980-81.

As regards question No. (3), the Tribunal has found that Shankarlal was not a sleeping partner. This finding is based on the material on record. The Tribunal was, therefore, right in rejecting the contention of the asses-see that Shankarlal/Kamlabai did not actually participate in the business of the assessee.

Consequently, our answers to all the three questions referred by the Tribunal are in the affirmative and against the assessee. In the circumstances of the case, parties shall bear their own costs of this reference.