1. The assessee is a firm of partnership carrying on bus transport business under the name and style of National Roadways. The firm was constituted by an instrument of partnership executed by 14 individuals as partners. The partnership came to be constituted under the following circumstances. All these 14 partners had individually advanced moneys to the total extent of Rs. 77,000 to one Sena Munuswamy Mudaliar who was operating two buses on two different routes. He was unable to repay the debt, nor any interest thereon. Therefore, he desired to make over these two buses with the route permits in consideration of a sum of Rs. 60,000 and also consented to repay the balance of Rs. 17,000 with interest. The 14 creditors considering that they cannot take over the buses individually formed into a partnership to carry on the bus transport in partnership. They executed the partnership deed on April 1, 1963. On the same day Sena Munuswamy Mudaliar executed an agreement in favour of the 14 partners agreeing to make over the said buses with their route permits. He had also undertaken in that agreement to apply to the motor vehicles authorities concerned for the transfer of the route permits in favour of the 14 partners. Thereafter, the assessee applied under Section 184 of the Income-tax Act, 1961, to the Income-tax Officer, Kanchee-puram, for registration of the firm. The Income-tax Officer considered that the firm was exploiting the route permit granted to Sena Munuswamy Mudaliar in an illegal manner without getting the route permit transferred in its name. In this view, he refused registration. But the Appellate Assistant Commissioner held that the firm was a genuine one, that the partnership firm were really owners of the buses and that running of buses by the assessee-firm or the business carried on by it on the permit standing in the name of another person was not illegal. He also pointed out that the Regional Transport Authority had also not objected to the running of the buses by the assessee-firm. The department preferred an appeal to the Appellate Tribunal. The Tribunal considered that the transfer of route permits without the necessary orders of the motor vehicles authorities was illegal, that it was not open for a person to ply buses without a valid permit issued by the authorities concerned and that any partnership entered into for the purpose of conducting a business in transport when the licence granted to ply the buses was in the name of a third party was ab initio void and punishable under the rules. In this view, the Tribunal held that the partnership itself was illegal and, therefore, not entitled to the benefit of registration under Section 185 of the Act. At the instance of the assessee the following question has been referred :
' Whether, on the facts and in the circumstances of the case, the assessee-firm is not entitled to the benefit of registration under Section 185 of the Income-tax Act, 1961 '
2. The point arising in this case is directly covered by a decision of this court in T.K.P.R. Ramanatha Chettiar & Brothers v. Commissioner of Income-tax : 73ITR811(Mad) . In that case also a partnership firm was carrying on business in lorry transport. But the permits were standing in the name of the original owners. The permits were not transferred to the firm under the provisions of the Motor Vehicles Act. The Tribunal was of opinion that inasmuch as the firm operated the lorries without a valid permit, which was prohibited by Section 42 of the Motor Vehicles Act, the firm was engaged inan unlawful activity of running the lorries without a valid permit and, therefore, it was not entitled to registration under Section 26A of the Indian Income-tax Act, 1922, corresponding to Section 185 of the Income-tax Act, 1961. This court took the view that though the firm was the owner of the lorries and operating them, the partnership cannot be regarded as illegal merely because the permits in regard to them stood in the names of their original owners and had not been transferred to the firm. The learned counsel for the revenue sought to distinguish this case on the ground that in this case there was a transfer of the two buses with their route permits under the deed dated April 1, 1963, executed by Sena Munuswamy Mudaliar. Since the transfer was without the sanction of the transport authorities it was illegal. Apart from the fact that this distinction has no bearing on the right of the firm to get itself registered, we are unable to agree with the learned counsel on facts that there was any such transfer under the deed dated April 1, 1963. Though the deed is styled as a release deed, under that document the said Sena Munuswamy Mudaliar only agreed to make over the two buses with their route permits for a consideration of Rs. 60,000. There was in fact no valid transfer under that agreement itself. It might be in part performance of that agreement the said Sena Munuswamy Mudaliar handed over possession of the vehicles to the assessee. But that does not mean that there is actually a transfer effected. So long as there is no transfer of the certificate in the name of the firm, in law there was no valid transfer. The decisions relied on by the Tribunal were, therefore, not applicable. The objection for the registration, therefore, fails. In the result, we hold that the firm is entitled to the benefit of registration under Section 185 of the Act and answer the reference accordingly. The assessee will be entitled to its costs. Counsel's fee, Rs. 250.