Pampa Wines vs Income Tax Officer

T.L. Viswanatha Iyer, J.—The petitioner which is a firm challenges the order, exhibit P-4, refusing registration to the firm u/s 185(1)(b) of the Income Tax Act, 1961. The firm consists of seven partners and it was doing abkari business in the year 1988-89. The abkari licence was in the name of one of the partners, Karthikeyan, and the business of the firm was carried on under his licence. Registration was refused on the ground that there is a transfer of the licence from Karthikeyan to the petitioner-firm and that it was an infraction of the conditions of the licence rendering the transfer and the business illegal. For reaching this conclusion, the respondent-income tax Officer relied on a decision of the Income Tax Appellate Tribunal in the case ITO v. Narayanan and Co. and in the case of ITO v. K.S. Ramakrishnan. In that case, it was held that, in such cases, a part of the right held by the partner in whose name the licence stood is transferred in favour of the remaining partners which is illegal. This is the sole basis of the decision.

Counsel for the petitioner, however, points out that this decision of the Tribunal stands overruled by a recent decision of the Special Bench of the Tribunal at Kochi, which is reported as ITO v. Raveendra Engineering Construction Co. [1992] K. L. J. (Tribunal Decisions) 15. It is pointed out that, on an examination of the relevant provisions of the Abkari Act, the Special Bench of the Tribunal came to the conclusion that, in such cases, there is no illegality committed in carrying on the business of the firm on an abkari licence issued to one of the partners and, therefore, registration may be granted. Since the only basis for the decision, exhibit P-4, is the earlier decision of the Tribunal, which stands overruled by the decision of the Special Bench, and there is no other independent consideration of the matter by the Income Tax Officer, I think the matter requires a remit to the respondent for consideration afresh.

Accordingly, the original petition is allowed and the order, exhibit P-4, is quashed. The respondent is directed to consider the petitioner''s application for registration taking note of the decision in ITO v. Raveendra Engineering Construction Co. [1992] K. L. J. (Tribunal Decisions) 15 also.

No costs.