The question that has been referred to us for our opinion is as follows :-

"Whether the Bench was correct in law in refusing to register the applicants as a firm under Section 26A of the Indian Income-tax Act ?"

Seven persons entered into an agreement for and had been carrying on an arrack business for several years. For the assessment year 1944-45 an instrument of partnership executed on 20th March, 1944, by these seven persons was sought to be registered with the Income-tax Officer under Section 26A of the Act. The arrack shops stood, some in the names of some of these individuals and some in the names of strangers. The Income-tax Officer refused registration on the ground that the firm as such was not a licensee, that the conditions under which the arrack licences were issued prohibited the sale, transfer or sub-renting of the licence without the Collector's permission, that such permission had not been obtained in this case, that the agreement of partnership entered into between the partners was unlawful and therefore the partnership could not be registered under Section 26A of the Act. The partnership was declared to be illegal on the ground that it violated Rule 27.