Law: Income Tax Act, 1922

Section: 2(2),(9),3,34,66(1)

Income tax Act (XI of 1922)-----Ss. 2(2), (9), 3, 34 & 66(1) M entered into an agreement dated 24 7 1962 with D, whereby D agreed to sell to M all its properties and assets consisting of two cement factories Option was given in agreement to M that the agreement or the subject matter could be transferred to any body corporate formed and controlled by M if so desired and in that case D shall transfer it to such a body corporate Agreement further provided that the profits and losses arising from the operation of the Factory subsequent to 30 9 1962, in the event of completion of the sale transaction, would be to the account of M Sale deed was executed on 30 9 1964 between D as vendor and P a company as vendee, being the nominee of M and M as the confirming party Question was whether in facts and circumstances M was liable to pay Income tax in respect of the income between 1 10 1962 to 30 9 1964 Held, M had entered into an agreement in his own name and not on behalf of the company P and he himself was the purchaser Fact that registration of sale deed could be made in the name of M's nominee company could not lead to the conclusion that the agreement was on behalf of the company or that there was any vacuum because in terms of agreement, from 1 10 1962 the business was to be run in the account of M Company during its pre¬-incorporation period, cannot earn profit or gain nor it can be said to carry on business during that period M and not the company was liable to pay the tax for relevant period in circumstances. Nishat Textile Ltd. v. Commissioner of Income tax 1974 PTD 54 ref. JUDGMENT SALEEM AKHTAR, J. Applicant No. 1 entered into an agreement dated 24 7 1962 with Dalmia Cement Ltd., whereby Dalmia agreed to sell to applicant No. 1 all its properties and assets in Pakistan comprising of two cement factories situated at Karachi and Dandot. In terms of the agreement option was given to applicant No. 1 that the agreement or the subject matter could be transferred to any body corporate formed and controlled by applicant No. 1, if so desired, and in that case Dalmia shall transfer it to such a body corporate. The main agreement was modified by a further agreement…

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