The main legal point established in the judgment is that forming a partnership by an abkari licensee and exploiting the license is prohibited under the Abkari Act and Rules, and such a partnership is void under S.23 of the Contract Act.

Sreedharan, J.

These references have come before us pursuant to an order of reference dt. 30.9.1993 passed by a Division Bench. The Bench doubted the correctness of an earlier Bench decision of this Court in C.I.T. v. Union Tobacco Co., (1961) 411. T. R.115 =1960 KLT 122. According to the Bench, in view of the later pronouncement of the Supreme Court, viz., Jer & Co. v. C.I.T., (1971) 79 I.T.R.546, the decision of this Court in (1961) 411. T. R 115 = I960 KLT 122 requires a second look as to whether it laid down good law.

2. I.T.R. No. 61 is a reference made by the Income tax Appellate Tribunal, Cochin Bench, at the instance of M/s. Narayanan & Co., an assessee under the Income tax Act, in relation to the assessment year 1981-82. I. T. R. Nos. 62 to 64 of 1991 are references made by the Tribunal at the instance of M/s. K. S. Ramakrishnan, P. K. Narayanan & Co. The assessment years concerned in these I. T. Rs. are 1980-81 to 1982-83. Common questions of law arise for consideration in these references.

The questions referred are:

1. "Whether, on the tacts and in the circumstances of the case, the firm was entitled to registration under S.185 (1) (a) of the Income tax Act, 1961, for the assessment year 1981-8211?

2. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that forming a partnership by an Abkari licensee and exploiting the licence amounts to transfer of licence making the business of the Linn illegal?"

3. "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding mat forming a partnership by an abkari licensee and exploiting the licence making the business of the firm illegal?"

"4. Whether, on the facts and in the circumstances of the case, the firm was entitled to registration under S.185(1)(a) of the Income-tax Act, 1961, for the assessment years. 1980-81, 1981-82 and 1982-83?"

3. The two assessees are two different firms. During the accounting period relevant to the assessment year 1981-82, the firm M/s. Narayanan & Co., Edappally and during the accounting periods relevant to assessment years 1980-81,1981-82and 1982-83, the firm M/s. K. S. Ramakrishnan, P. K. Narayanan & Co., Ernakulam, carried on abkari business exploiting the licences granted in the name of one of the partners of the firm. The firm applied for registration under S.184 of the Income tax Act, 1961. The Income-tax Officer found that there was transfer of licence obtained in the name of one of the partners when the firm was allowed to exploit the licence. The said action on the part of the firm was a violation of the provision contained in S.15 of the Abkari Act, Consequently, the Income tax Officer refused to register the partnership under the Income tax Act. On appeal, C. I, T. (Appeals) took the view that there was absolutely no prohibition against carrying on of a business in liquor by more than one person forming themselves into a partnership, since the prohibition under the Act was in respect of the transfer of the licence and not against the exploitation of the licence in partnership with another. Commissioner, in support of this view, relied on the decision of the Supreme Court in Jer & Co. v. C.I.T. (1971) 79 I. T. R.546. Appellate Assistant Commissioner consequently held that there was no violation of the Abkari Act or any other provisions of law in constituting a partnership for conducting business as per the licence obtained in the name of one of the partners. Thus, he cancelled the order passed by the Income tax Officer refusing registration to the firm. Revenue filed appeal to the Tribunal questioning the decision of the first appellate authority. Appellate Tribunal went into the question as to whether entering into a partnership by a

licensee will amount to sale or otherwise transfer of the licence. It took the view that the prohibition in the Abkari Act against the "sale or otherwise transfer" of the licence was an embargo, which was of a ver