The inclusion of new partners in an excise license for country liquor without permission from the excise authorities makes the partnership illegal and opposed to public policy.

1. The liquor licensee's alleged efforts to allow back door entry device, permitting new partners in firm without permission of the excise authorities has assumed another dimension on the question of such adulterated firms recognition by Income-tax authorities, under the provisions of the registration of firms, under section 185 of the income-tax Act. The excise authorities normally treats default of payment in other excise licences, conviction etc. as disqualification for taking a licence. Whether the boot-leggers, defaulters, unscrupulous unsocial elements, once prohibited from entering by front doors, can be allowed back door entry without scrutiny of their credential and credibility by excise authorities, is an important facet of this juristic debate to be examined for deciding the question, whether under the income-tax Act registration of such firms, should be allowed, where no scrutiny of such disqualifications is permissible.FACTS

2. This legal debate has gained added importance on account of the decisions of Division Benches of this court giving green signal and permitting registration any yet third Division Bench has not fallen in line with it and expressed a strong voice of dissent emphatically by making reference to Full Bench, for reversal of the earlier view of Durga Madira Sangh. We are therefore, required to have a complete comprehensive and thorough survey and study of the various relevant provisions of Rajasthan Excise Act and plethora of decisions from Privy Council to Supreme Court in addition to the divergent view of the High Courts sitting in Division Benches and Full Benches, about the various dimensions and facets of this debate.

3. Hon'ble Mr. Justice Dwarka Prasad Gupta and Hon'ble Mr. justice S. S. Byas, constituting a Division Bench of this Court, have therefore, referred this case for decision by a larger Bench on account of the conflicting views between different Benches of the Rajasthan High Court.

Apparently there is a sharp divergence of judicial opinion on an important question of law regarding the registration of a partnership firm under the Income -tax Act when a licensee of Rajasthan having a licence under the Rajasthan Excise Act enters into a partnership with strangers or a third party without obtaining permission of concerned Excise Officer.

4. A Division Bench of this Court in Brij Mohan v. N. V. Vakharia (1965 RLW 254) held that business for manufacture of medicines and toilet preparation could not be lawfully carried on without a proper licence under the Act of 1955 and therefore the partnership entered into without permission of the concerned authority would be illegal.

5. In Durga Madira Sangh v. Commissioner of Income-tax (1985) 44 C.T.R. Page 266); (153 I.T.R. 226) decided by another Division Bench, this court took the view that taking of a stranger in the partnership of an Excise Licence, without permission of the Excise Authority under the Rajasthan Excise Act would not make the partnership illegal and the Income-tax authorities can recognise it as a partnership firm, with the stranger for income tax purpose.

6. Yet another Bench of this court consisting of Hon'ble Justice S. K. Mal Lodha and Hon'ble Justice I. S. Israni in Commissioner of Income Tax v. Roop Lal Dan Chand Chi orgarh (D. B. Income Tax Reference No. 15 of 1980) decided on February 10, 1986. held that such a firm would be valid, as the conditions provided for registration under Section 185 of the Income-tax Act are satisfied and it is entitled to registration. It also held that there was no contravention of provisions of the Rajasthan Excise Act when Roop Lal took over as partner in the business of Excise Licence.

7. It would thus be seen that there are two Division Bench Judgments of this Court in M/s Roop Lal (supra) decided on February 10, 1986 and curiously enough after the reference was made on May 6, 1985 in Motilal Chunnilal's case which is now to be decided; and the earlier view in Durga Madira's ca