G.P. Singh, C.J.
1. This is a reference under Section 256(1) of the I.T. Act, 1961, referring for our answer the following questions of law :
'(1) Whether, on the facts and in the circumstances of the case, the certificate dated January 15, 1968, granted by the District Excise Officer, Khandwa, could be taken as satisfying the requirements of rule VI of the Madhya Pradesh Excise Rules so as to treat the assessee's partnership as having been validly formed to carry on the excise business?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in confirming the orders of the lower authorities, refusing registration to the assessee-firm under the Income-tax Act?'
2. The material facts are that one Narsaiya took five liquor contracts on 21st July, 1967, on payment of Rs. 2,39,400. On 1st September, 1967, Narsaiya executed a deed of partnership along with another Narsaiya, son of Mallahiya, for carrying on the above liquor business The firm sought registration under Section 184 of the I.T. Act. The ITO rejected the application for registration on the ground that the partnership was entered into without the prior permission of the Collector and it was illegal. The same view was taken by the AAC. The Tribunal also took the same view. Before the Tribunal the assessee produced a certificate dated 15th January, 1968, issued by the District Excise Officer which reads as follows:
' Certified that Shri Narsaiya, s/o Mallahiya, Excise Liquor Contractor has informed us, vide application dated 8-9-67 regarding the intimation of change in the ownership and working of Khandwa group shop by the firm, M/s. Narsaiya & Co., for the financial year 1967-68. Intimation was accepted and accordingly he was permitted for change.
District Excise Officer, Khandwa.
3. The assessee contended on the basis of the certificate that it must be held that the partnership was constituted with the permission of theauthorities concerned and it was valid. The Tribunal took the view that the certificate produced did not show that the permission of the Collector was obtained and that the said permission was endorsed on the licence granted under the Excise Act. On an application made by the assessee the questions of law set out above by us have been referred by the Tribunal.
4. The relevant rule is Rule VI of the M.P. Excise Rules which comes under the heading 'General Licence Conditions'. The rule reads as follows:
' VI. Transfer or sub-lease of licence.--No privilege of supply or sale shall be sold, transferred or sub-leased, nor shall a holder of any such privilege enter into a partnership for the working of such privilege in any way or manner without the written permission of the Collector, which shall be endorsed on the licence. A partner, sub-lessee, or transferee shall be bound by all the conditions of the licence, but the original licensee also shall continue to be responsible to the State Government for the due payment of the licence fees and proper working of the shop, except that in the case of a transfer his responsibility shall cease as soon as the transfer is endorsed on the licence.'
5. The licences granted under the Excise Rules contain a condition that the licensee is bound by the General Licence Conditions prescribed by the Rules. Section 39 of the Act makes any act done in breach of any of the conditions of the licence punishable as a criminal offence. The consistent view of this court right from 1937 is that an agreement of partnership in liquor contract entered in violation of Rule 6, i.e., without the permission of the Collector and without the permission being endorsed on the licence is void ab initio (See Nandlal v. Thomas J. William, AIR 1937 Hag 250, CIT v. Pagoda Hotel and Restaurant : 93ITR271(MP) and C1T v. Sheonarayan Harnarayan 0065/1972 : 100ITR213(MP) ). Learned counsel for the assessee submitted before us that on the basis of the certificate issued by the District Excise Officer it ought to have been held by the Tribunal that the permission applied for was granted by the Collector and the condition of Rule 6 was substantially complied with. We are unable to agree with this submission. Rule 6, on a plain reading, requires the written permission of the Collector. It further requires that permission be endorsed on the licence. The District Excise Officer is not the Collector. The certificate issued by the former does not say that permission was granted by the Collector. Even assuming that the District Excise Officer permitted the formation of the partnership after receiving the intimation from the assessee, it does not satisfy the requirement of Rule 6. If the assessee's case was that permission was really granted by the Collector as required by the rule, the assessee should have produced a certified copy of the permission which was not done. The certificate issued by the District Excise Officer is of no help to the assessee. In our opinion, therefore, the Tribunal was right in holding, that the written permission of the Collector required by Rule 6 was not obtained and that no such permission was endorsed on the licence.
6. The learned counsel for the assessee then submitted that the cases of this court mentioned above on the construction of Rule 6 required reconsideration. In this connection reference was made to the decision of the Supreme Court in Jer and Co. v. CIT : 79ITR546(SC) . The Supreme Court judgment is clearly distinguishable. In that case, Rule 322 of the Excise Manual (U.P.), on the basis of which it was held that there was a prohibition of entering into partnership, was held to be inapplicable to licence in Form FL 2. There was also no condition in the licence prohibiting entering into partnership. In these circumstances, it was held that the partnership was not illegal. In the case before us, Rule 6, which prescribes the general conditions of licence, is clearly applicable. Moreover, all licences issued contained a condition that the licensee was bound by the general conditions prescribed by the Rules. Indeed, the aforesaid decision of the Supreme Court was referred to and distinguished in Sheonarayan Harnarayan's case 0065/1972 : 100ITR213(MP) . We are, therefore, unable to agree that the aforesaid decisions of this court require reconsideration.
7. For the reasons given above, we answer question No. 1 in the negative and question No. 2 in the affirmative, in favour of the Department and against, the assessee. There shall be no order as to costs of this reference.