income-Tax Officer Vs. Koonan'S Jewellery - Court Judgment

Excerpt:
1. these appeals are by the revenue. the assessee is a partnership firm which was originally granted registration under the income-tax act, 1961, for the assessment years 1981-82 to 1984-85. however, by an order under section 186 of the it act, the assessing officer withdrew the registration for the reason that licence to carry on the business under the gold (control) act, 1968 was only in the name of one of the partners of the assessee; under the provisions of section 27 of the gold (control) act, 1968 read with rule 7 of the gold control (forms, fees and misc. matters) rules, 1968 the licence was not transferable or saleable and therefore the partnership that was formed was illegal as it contravened to the provisions of the gold (control) act. he then placed reliance on the decision of.....

Judgment:
1. These appeals are by the revenue. The assessee is a partnership firm which was originally granted registration under the Income-tax Act, 1961, for the assessment years 1981-82 to 1984-85. However, by an order under Section 186 of the IT Act, the Assessing Officer withdrew the registration for the reason that licence to carry on the business under the Gold (Control) Act, 1968 was only in the name of one of the partners of the assessee; under the provisions of Section 27 of the Gold (Control) Act, 1968 read with Rule 7 of the Gold Control (Forms, Fees and Misc. matters) Rules, 1968 the licence was not transferable or saleable and therefore the partnership that was formed was illegal as it contravened to the provisions of the Gold (Control) Act. He then placed reliance on the decision of the Hon'ble High Court of Kerala in the case of CJTv. Union Tobacco Co. [1961] 41 ITR 115 and also the decision of the Income-tax Appellate Tribunal in the case of Narayanan & Co. [IT Appeal No. 155 (Coch.) of 1985 dated 30-4-1989]. Thus, the registration was cancelled for the impugned assessment years.

2. On appeal, the learned Dy. CIT (Appeals) noticed that the decision of the Tribunal in the case of Narayanan & Co. (supra) stood overruled by the decision of the Special Bench of the Tribunal in the case of ITO v. Raveendra Engg. Construction Co. [1992] 198 ITR 32 (Coch.). The Dy.

CIT (Appeals) further held that, though the Special Bench decision was on the licence issued under the Abkari Act, the principles laid down therein would govern the facts of the case of the assessee. There was no irregularity in the partnership when a licence-holder formed a partnership with others to run the business. Exploitation of the licence alongwith other persons would not tantamount to transfer of licence. For these reasons, he held that there was no illegality in the partnership that was formed by the assessee and the registration originally granted was valid and was not to be withdrawn. The revenue is on appeals and relies on the order of the Assessing Officer by referring to Sections 27 and 52 of the Gold (Control) Act, 1968 read with Rule 7 of the Gold Control (Forms, Fees and Misc. matters) Rules, 1968. Shri Satyanarayana, the learned representative of the assessee relied on the order of the Dy. CIT (Appeals).

3. We have carefully considered the submissions of the parties and perused the records. Under the Gold (Control) Act, 1968, licence is given to a dealer. Dealer has been defined in clause (h) of Section 2, as follows:- 2. Definitions. - In this Act, unless the context otherwise requires, - (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- (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-.

From the definition it is clear that any person including a firm can be a dealer. Such person can carry on the business either directly or otherwise. The term otherwise is of very wide import. It would mean that a person can carry on the business by himself as a dealer or through the medium of a firm. Further the firm itself can be a dealer under clause (h) of Section 2 of the Gold (Control) Act. Thus from the definition of dealer, we hold that a firm can be a dealer or a person can be a dealer carrying on the business by himself or through the medium of a firm. So long as there is no prohibition on a firm to carry on the business as a dealer under the Gold (Control) Act and so long as there is no prohibition on a person to carry on the business otherwise than directly, it cannot be held that merely because the licence was held in the name of one of the partners, the firm has contravened the provisions of the Gold (Control) Act. The provisions of Sections 27 and 52 relied on by the revenue should be read and understood in the context of the definition of a dealer as found in Section 2 and not de hors the same. This apart, the decision of the Special Bench in the case of Raveendra Engg. Construction Co. (supra) though rendered in the context of Abkari Act would be of avail to the assessee for the preposition that there is no illegality in the carrying on of the business by the firm by exploiting the licence held in the name of one of its partners; the partner allowing the firm to utilise the licence in conjunction with other persons does not in effect transfer the licence in favour of the firm. From the partnership deed it is seen that he has not transferred the licence to and in favour of the firm.

For these reasons, we uphold the order of the Dy. CIT (Appeals).