Commissioner of Income Tax vs Koonan''s Jewellery

K.K. Usha, J.—These references are at the instance of the revenue. The relevant assessment years are 1981-82 to 1988-89. IT Appeal Nos. 653 to 656 relating to the assessment years 1981-82 to 1984-85 were disposed of by a common order dated 26-8-1993. IT Appeal Nos. 657 to 659 and 809 for the assessment years 1985-86 to 1988-89 were disposed of on the same day by another common order. The questions referred for the opinion of this Court are as follows:

Whether, on the facts and in the circumstances of the case and based on the definition of ''dealer'', under the Gold (Control) Act, the Tribunal is right in law in holding that ''it cannot be held that merely because the licence was held in the name of the one of the partners, the firm has contravened the provisions of the Gold (Control) Act''?

Whether, on the facts and in the circumstances of the case, and for the reason stated by the Tribunal,

(i) the assessee is entitled to registration?

(ii) the Tribunal is right in law in not confirming the order of the assessing authority withdrawing registration?

The assessee is a partnership firm doing jewellery business. The registration/continuation of registration originally granted was cancelled by the assessing authority on the ground that licence was in the name of one of the partners and not in the name of the firm and that the firm was carrying on business under the Gold (Control) Act, 1968, without a licence in its name. Appeal filed by the assessee was allowed by the first appellate authority. Even though the matter was taken up in further appeal by the revenue, the Tribunal upheld the orders passed by the first appellate authority, following a decision of a Special Bench in the case of ITO v. Raveendra Engg. Construction Co. [1992] 198 ITR 32 (Coch.)(AT).

Both sides submitted before us that the common issue involved in these references is governed by the principle laid down by the decision of a Full Bench of this Court in Narayanan and Co. and K.S. Ramakrishnan, P.K. Narayanan and Co. Vs. Commissioner of Income Tax, .

Section 27 of the Gold (Control) Act, provides that no person shall commence or carry on business as a dealer unless he holds a valid licence issued in this behalf by the administrator. The term ''dealer'' is defined u/s 2(h) which reads as follows:

(h) ''dealer'' means any person who carries on, directly or otherwise, the business of making, manufacturing, preparing, repairing, polishing, buying, selling, supplying, distributing, melting, processing or converting, gold, whether for cash or for deferred payment or for commission, remuneration or other valuable consideration, and includes-

(i) a Hindu undivided family which carries on such business;

(ii) a local authority, company, society registered under the Societies Registration Act, 1860 (21 of 1860), co-operative society, incorporated under any law with respect to co-operative societies, club, firm or other association of persons which carries on such business, or

Admittedly, in this case, the dealer, namely, the person who is carrying on the business of making, manufacturing, etc., of gold is the firm. It is not in dispute that the firm is not having a licence in its name. If that be so, the business is being carried on by the firm in clear violation of the mandatory provisions contained u/s 27 of the Gold (Control) Act.

Rule 7 of the Gold Control (Forms, Fees & Miscellaneous Matters) Rules, 1968, provides that every licence issued or renewed under the Act shall not be saleable or otherwise transferable. In the light of the above, an individual partner who is having a licence u/s 27 of the Gold (Control) Act cannot make use of the same for the purpose of conducting the business through a partnership firm. Admittedly, in this case, the partner in whose favour licence has been issued by the administrator is exploiting the right to conduct the business obtained under the licence through the partnership firm. Such a procedure would certainly come within the second limb of rule 7 which provided that the licence is not saleable or otherwise transferable. This aspect was the subject-matter of consideration by the above-mentioned decision of this Court in the light of similar provisions under rule 6(22) of the Kerala Abkari Shops (Disposal in Auction) Rules, 1974. This Court took the view that exploiting the licence issued in the name of one of the partners by the partnership firm would amount to ''transfer otherwise'' and, thus, would be in violation of the Rules. By applying the same principle also in this case, we find that the contention raised by the revenue is to be accepted. In the light of the above discussion, we answer question No. 2 in the negative, against the assessee and in favour of the revenue. Since question No. 1 is another facet of question No. 2, we decline to answer question No. 1.