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TMI Blog1996 (2) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... poration profits of Rs. 24,862 cannot be included in the assessment of the assessee-company for the assessment year 1974-75 ? " The assessment year is 1974-75. The relevant accounting year ended on September 30, 1973. The assessee-company was incorporated on October 30, 1972. It filed a return for the assessment year 1974-75 disclosing an income of Rs. 1,79,690. The Income-tax Officer assessed the assessee-company's total income at Rs. 2,04,530. In so doing, he included, inter alia, the sum of Rs. 24,862 as the assessee-company's pre-incorporation profit. He found that the promoters of the assessee-company had carried on business on its behalf and had received the sum of Rs. 80,534 for the period October 1, to October 29, 1972. Aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, but treated the promoters as accountable therefor. The Allahabad High Court observed that it was true that under the law the respondent-company had come into existence only upon its incorporation and it was not possible to hold that the legal title in the business or its profits had vested in it before its incorporation. It was, however, well-settled that if the promoters of a company carried on business on behalf of a company which they intended to float, the company, on its incorporation, had a right to either accept what had been done on its behalf by the promoters or repudiate the same. If the company accepted what the promoters had done on its behalf it had a right to claim from them the entire income for the period during which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly assessed in its hands. The aforesaid decision, it may be mentioned, was followed in a subsequent decision of the Allahabad High Court, Security Printers of India (P.) Ltd. v. CIT [1970] 78 ITR 766. The Calcutta High Court has taken a different view in CIT v. Tea Producing Co. of India Ltd. [1963] 48 ITR 200. The respondent-company was incorporated on May 29, 1951, with, inter alia, the object of taking over a tea estate as a going concern. It commenced business on June 23, 1951. In November, 1951, it purchased the tea estate with effect from January 1, 1951, and the terms of the sale deed stated that all the income and profits from January 1, 1951, would belong to the respondent-company and it would be liable for all tax dues from that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to its incorporation. In the case of Bijli Cotton Mills Ltd. [1953] 23 ITR 278, the Allahabad High Court had placed reliance upon the judgment of the Bombay High Court in the case of Abubaker Abdul Rehman [1939] 7 ITR 139 and had taken the view that under the Income-tax Act, it was not only the legal ownership that had to be looked into but the court could go into the question of beneficial ownership and decide who should be held liable for tax after taking into account the question as to who was, as a matter of fact, in receipt of the income which was to be taxed. The Calcutta High Court pointed out that the observations of the Bombay High Court in this regard had been disapproved by the Privy Council in CIT v. Dewan Bahadur Dewan Krish ..... X X X X Extracts X X X X X X X X Extracts X X X X
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