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1996 (2) TMI 363 - SUPREME COURTWhether the Appellate Tribunal was right in holding that the pre-incorporation profit of Rs. 24,862 cannot be included in the assessment of the assessee-company for the assessment year 1974-75 ? Held that:- A company can enter into an agreement only after its incorporation. It is only after incorporation that a company may decide to accept that its promoters have carried on business on its behalf and appropriate the income thereof to itself. The question as to who is liable to pay tax on such income cannot depend upon whether or not the company after incorporation so decides. It is he who carried on the business and received the income when it accrued who is liable to bear the burden of tax thereon. It may be that the transaction of appropriation by a company to itself of income earned by its promoters before its incorporation is also subject to tax; that is not in issue before us and we do not express any view in that behalf. For the reasons aforestated, we answer the question in the affirmative and in favour of the assessee.
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