Law:

Section:

Company -Pre-incorporation profits -Business carried on by promoters before incorporation of company -Profits of the pre-incorporation period -Whether assessable in the hands of the promoters -Held yes -- JUDGMENT MUSHTAQ HUSSAIN, J.---The Government of West Pakistan, the Pakistan Industrial Development Corporation and the Guest Agency Company Ltd., entered into an agreement for the 'promotion' of a public limited company under the name and style of Haripur Rosin Turpentine Factory Limited. This agreement was executed on the 27th February, 1958. The Company was duly incorporated under the Companies Act on the 18th December, 1959, and started functioning on the 1st March, 1960. In anticipation of the incorporation, the aforesaid promoters had started business on the 1st April, 1958. This business was taken over by the incorporated company on the 1st March, 1960. 2. When the time came to assess this business to Income-tax, the Income-tax Officer assigned the status of an Association of Persons to the three promoters for the charge year 1959-60. The following year was split up into two portions. Up to 29th February 1960, the status of an Association of Persons was continued while for the period 1st March, 1960, on wards it was the company which was assessed and not the Association of persons. 3. The company felt aggrieved and filed an appeal directly to the Tribunal. The Company took up the stand that the promoters had started the business on behalf of and in anticipation of the incorporation of the company and the promoters were, therefore, not liable personally as an Association of Persons for the profits made before the incorporation of the company. 4. The Tribunal did not agree with the company and rejected the appeal on 10th April, 1965. The company applied for the reference of the question of law involved in this case to this Court for opinion. The departmental representative who appeared before the Tribunal suggested that the question be drawn up in a different manner. The Tribunal agreed with the departmental representative and referred the following question to us for the opinion:- "Whether on the facts and in the circumstances of the case the Appellate…

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