D.S. Tewatia, J.
1. Two persons, Hardit Singh and Pal Chand, had secured liquor licence from the Punjab excise authorities for wholesale vending at Sirhind and for retail vending at Sirhind Mandi, Sirhind City, Jalbehra and Madhaur, After securing the licence and the contract to carry on the aforesaid business the said two partners joined hands with eight other persons, namely, Vinod Singh, Mulkh Raj, Kamal Dev, Hardev Singh, Mehar Singh, Rehman Singh, Ramji Dass, Maharaj Krishan, and formed a partner ship-firm known as M/s. Hardit Singh Pal Chand & Co., Wine Contractors, Sirhind. The firm applied for registration with the income-tax authorities under Sections 184 and 185 of the I.T. Act, 1961 (hereinafter referred to as ' the Act '). The ITO denied registration. On appeal, the Tribunal allowed the registration. The CIT sought the following question to be referred to this court, which the Tribunal did :
' Whether, on the facts and in the circumstances of the case, the Tribunal was justified in allowing registration to the firm '
2. As would be clear from the order of the Tribunal on the appeal of the respondent-assessee, it concluded the case against the revenue on the strength of the Supreme Court decision in Jer and Co. v. CIT : 79ITR546(SC) . It would be clear from the following passage from its order :
' After hearing both the parties, we are of the view that the ratio laid down by their Lordships of the Supreme Court in Jer & Co.'s case : 79ITR546(SC) , quoted above fully cover the assessee's case and when there is a judgment of the Supreme Court on an issue identical to the one before us, the judgment of the Supreme Court takes precedence over a judgment of the High Court because a judgment of the Supreme Court is the law of the land. With utmost respect to their Lordships of the Punjab and Haryana High Court for their views expressed in the two citations referred to above, we follow the judgment of their Lordships of the Supreme Court in Jer and Co.'s case : 79ITR546(SC) , and hold that the assessee-firm is entitled to registration. We, therefore, direct that the registration should be allowed. '
3. Learned counsel for the revenue, D. N. Awasthy, has canvassed that the Supreme Court decision in question is clearly distinguishable in that there the only question was as to whether Rule 322 framed under the U P. Excise Act governed the licence granted to one of the partners of the assessee-company in Form F. L. 2 under the U.P. Excise Manual. It was held thatthe said rule did not govern the licence and the licence contained no condition which prohibited the holder thereof from entering into partnership with strangers. The condition referred to in the licence merely provided that the licence shall not be subject to transfer. It was held that since the licence carried no prohibition against the holder thereof entering into a partnership with strangers, the question whether the partnership was illegal did not arise.
4. It has been maintained by the learned counsel for the revenue that the provisions of the Excise Act and the Rules, which shall be presently mentioned, clearly prohibit the possession of liquor and its sale by any person other than a licensee and that the licence granted in Form ' L ' carries an express condition which provides that the licence is granted subject to the provisions of the Punjab Liquor Licence Rules, thus importing all the restrictions and prohibitions contained in the Rules into the conditions of the licence.
5. Section 24 of the Punjab Excise Act, 1914 (hereinafter referred to as the ' Excise Act '), provides that no person shall have in bis possession any quantity of any intoxicant in excess of such quantity as the State Government has, under Section 5, declared to be the limit of retail sale, except under the authority and in accordance with the terms and conditions of a licence. Section 26, inter alia, provides that no intoxicant shall be sold except under the authority and subject to the terms and conditions of a licence. Section 58 enabled the State Government to make rules for the purpose of carrying out the provisions of the Excise Act or any other law for the time being in force relating to excise revenue.
6. In exercise of the power conferred under Section 58 of the Excise Act, the Punjab Government promulgated the Punjab Liquor Licence Rules, 1956. Rule 3 thereof envisages granting of licence to a certain licensee in respect of certain premises. Rule 4 provides that a licence may be granted only to-
' (a) an individual;......
(d) a partnership or firm.'
7. Rule 6 provides that when a licence is granted to a partnership or firm not incorporated under any Act, all the individuals comprising the partnership or firm should be specified on the licence. Rule 7 enables the original partners to take a new partner provided the proposed partner is eligible under the Punjab Intoxicants Licence and Sale Orders or these rules, in which case he shall be responsible for all obligations incurred or to be incurred under the licence during the period of its currency as if it had originally been granted or renewed in his name. Sub-rule (26) of Rule 37 prohibits the licensee from allowing any person to conduct sales in hisbehalf unless the name of such person has been previously submitted to the Collector for approval and endorsed by him on the licence.
8. The sum and substance of the provisions of the Excise Act and the Rules extracted above is that no person shall possess beyond the permissible quantity of intoxicant, i.e., liquor for consumption or sale without licence. If the licensee is a firm, it is prohibited from taking a new partner without the approval of the concerned authorities. The rule also prohibits anybody to sell on behalf of the licensee unless the name of such person is approved and endorsed on the licence.
9. By virtue of the conditions in the licence to the effect that the licence is granted subject to the provisions of the rules, the aforesaid provision of the rules stands incorporated as conditions in the licence. There is the clear finding by the Tribunal that the names of the eight persons stranger to the licence were not endorsed on the licence in terms of Rule 37, Sub-rule (26). In such a situation, the partners may have complied with all the requisites under the Partnership Act or the provisions of the Contract Act for the purposes of entering into a valid contract of partnership but the same was not entitled to be registered for the purpose of income-tax under Sections 184 and 185 as it carried on the business of possessing and selling liquor in violation of the provisions of the Punjab Excise Act and the Rules framed thereunder as also of the conditions of the licence,
10. The present case is clearly distinguishable from Jer & Co.'s case : 79ITR546(SC) , for the licence to which reference has been made by their Lordships did not carry the kind of conditions like those in the present case. To the case in hand the decisions of this court in CIT v. Benarsi Das and Co. and Lalchand Mohan Lal Fazilka v. CIT aptly apply. The ratio of these decisions is clearly attracted and these have been rightly followed by the ITO and the AAC.
11. The assessee-respondent had, at one stage or the other, also relied upon CIT v. K.C.S.Reddy : 38ITR560(Patna) and Oudh Cocogem and Provision Stores v. CIT : 69ITR819(All) . The facts and situations involved in these two cases are entirely different and these two cases are clearly distinguishable on that account. In these cases, it was clearly held that the firm did not engage in any illegal activity.
12. Mr. D. N. Awasthy, learned counsel, in all fairness brought to our notice the Division Bench decision in CIT v. Gian Chand & Co. , not because of its direct bearing on the present case but because of an obiter dicta to the effect that the Supreme Court decision in Jet & Co.'s case : 79ITR546(SC) had shaken the force of this court's earlier two decisions in Benarsi Das and Company's case and Lalchand Mohan Lal Fazilka's case . That was a case of the firm whose five partners obtained licence in theirseparate names from the Fisheries Department of the Punjab Government for fishing in public waters. They joined four other persons as partners in the same firm. The partnership had applied for registration under the I.T. Act. The question posed was as to whether the partnership formed had become an illegal firm by taking four others as partners. In the Fisheries Act there was no such prohibition regarding selling or possessing fish as in the Excise Act or the Rules. The only prohibition envisaged under Section 3 of Punjab Fisheries Act, 1914, is that nobody should engage in fishing in public waters without licence. Clause (b) of Sub-section (3) of Section 3 prescribed seasons during which killing of fish was prohibited. Clause (c) of Sub-section (3) of Section 3 prohibited killing of fish below the prescribed minimum weight. Section 4 empowered the State by notification to prohibit selling of fish in any specified areas in contravention of Clauses (b) and (c) of Sub-section (3) of Section 3 of the Act.
13. The Fisheries Rules did not contain any rule prohibiting the entering into partnership in so far as the fishing licences are concerned.
14. The matter came to the High Court on a reference at the instance of the CIT on behalf of the revenue. Reliance was placed on the two Division Bench decisions of this court reported in Benarsi Das and Company's case and Lalchand Mohan Lal Fazilka's case . It was pointed out that the decisions pertain to opium licences and then it was observed in passing that the correctness thereof had been put in jeopardy by the Supreme Court decision infer & Co.'s case : 79ITR546(SC) .
15. To the extent the Bench relied on fer & Co.'s case : 79ITR546(SC) , it was right in that like in fer & Co.'s case the licence contained no conditions prohibiting the licensee from entering into partnership. There was no rule in the Punjab Fisheries Rules prohibiting the licensee from entering into partnership in regard to the fishing licences. But having held so it was unnecessary to examine the correctness of this court's aforesaid earlier decisions which were rendered in the light of the Opium Act and the Rules, the conditions and prohibitions contained wherein are identical with those contained in the Excise Act and the Rules thereunder.
16. For the reasons stated, we answer the reference in the negative, i.e., against the assessee and in favour of the revenue. Since the assessee is not represented before us, we make no order as to costs.