Bharucha, J. - (1.) This is a reference under Section 257 of the Income Tax Act, 1961, made by the Income Tax Appellate Tribunal directly to this Court in view of the difference in the views taken by the Allahabad and Calcutta High Courts upon the same issue. The question to be answered reads thus:- "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the pre-incorporation profits of Rs. 24,862/- cannot be included in the assessment of the assessee-company for the Assesment Year 1974-75 -
(2.) The assessment year is the Assessment Year 1974-75. The relevant accounting year ended on 30th September, 1973. The assessee company was incorporated on 30th October, 1972. It filed a return for A Y 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 promotors of the assessee-company had carried on business on its behalf and had received the sum of Rs. 80,534/- for the period 1st October to 29th October, 1972. After deducting expenses, the income in this behalf was Rs. 24,862/-. According to the I.T.O. this was the income of the assessee company because its promoters had acted and carried on business on its behalf and the assessee company had accepted the act of the promotors after its incorporation.
(3.) The assessee company's appeal to the Commissioner of Income-tax (Appeal) was dismissed. The assessee company appealed to the Tribunal. The Tribunal observed that the real questions were:When did the pre-incorporation profit accrue Did it accrue before incorporation If so, who was the legal entity which carried on the business and earned the income at the time of accrual The Tribunal held that, in law, the promotors and the assessee company were different legal persons and that the income which had accrued on 29th October, 1972, was income that was earned by the promotors. Accordingly, the appeal of the assessee company was allowed.;