NARAYANAN AND CO Vs. COMMISSIONER OF INCOME TAX
HIGH COURT OF KERALA
NARAYANAN And CO.
COMMISSIONER OF INCOME TAX
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K.S.PARIPOORNAN, J. -
(1.)IT Ref. No. 61 of 1991 is a reference made by the Tribunal, Cochin Bench, at the instance of M/s
Narayanan & Co., an assessee to income-tax. The assessment year concerned is 1981-82. IT Ref.
Nos. 62 to 64 of 1991 are references made by the Tribunal, Cochin Bench, at the instance of M/s
K.S. Ramakrishnan, P.K. Narayanan & Co., Ernakulam. The assessment years concerned are 1980-
81 to 1982-83. Common questions of law arise for consideration in the four references. The Tribunal considered the four appeals, out of which the questions of law have been formulated and
referred to this Court together, and passed a common order dt. 30th April, 1989 (Annexure-C).
The appeals filed by the Revenue were allowed.
(2.)THE two assessees are two different firms. They carried on Abkari business exploiting the licences granted by the Excise Department to one of the partners of the respective firms. The firms
applied for registration under s. 184 of the IT Act, 1961. The ITO found that there was transfer of
licence obtained in the name of one of the partners when the firm was allowed to exploit the
licences. It was held that s. 15 of the Abkari Act was violated. In appeal, the CIT(A) held that there
was no prohibition against the carrying on of a business in liquor by more than one person forming
themselves into a partnership. He held that under the Abkari Act, the prohibition was in respect of
the transfer of the licence and not against the exploitation of the licence in partnership with
another person. He relied on the decision of the Supreme Court in Jer & Co. vs. CIT (1971) 79 ITR
546 (SC). The Revenue took up the matter in appeals before the Tribunal. The challenge was against the grant of registration to the firms despite the fact that the firms by themselves do not
hold any licence to carry on Abkari business and the licence stood only in the name of one of the
partners. The plea was that there was infraction of the law. The Tribunal held that the only point to
be adjudicated in the appeals is as to whether entering into a partnership by a licensee will amount
to sale or otherwise transfer of the licence or not. The Revenue stressed heavily on a Bench
decision of this Court in CIT vs. Union Tobacco Co. (1961) 41 ITR 115 (Ker), besides the decision
of the Supreme Court in Sunil Siddharthbhai vs. CIT (1985) CTR (SC) 172 : (1985) 156 ITR 509
(SC) and Motilal Chunnilal vs. CIT (1987) 62 CTR (Raj) 132 (FB) : (1987) 168 ITR 650 (Raj)(FB).
On the other hand, the assessees relied upon the decision in CIT vs. K.C.S. Reddy (1960) 38 ITR 560 (Pat), Dayabhai & Co. vs. CIT (1966) 59 ITR 364 (MP) and Jer & Co. vs. CIT (supra).
(3.)THE Tribunal took the view that the Bench decision of this Court in' CIT vs. Union Tobacco Co. (supra) fully covers the matter and mainly relying on the said Bench decision of this Court in
preference to the decision of the Supreme Court in Jer and Co. vs. CIT (supra), held that the
formation of the partnership is not valid and there was violation of the (sic--and) infraction of the
provisions of the Abkari Act and so the firms are not entitled to registration. It is thereafter, at the
instance of the assessee, two questions of law each in IT Ref. No. 61 of 1991 and IT Ref. Nos. 62
to 64 of 1991 have been referred by the Tribunal, Cochin Bench for the decision of this Court.
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