LIFE INSURANCE CORPORATION OF INDIA,BOMBAY vs COMMISSIONER OF INCOME TAX, BOMBAY

The Supreme Court addressed a reference under Section 256(1) of the Income-tax Act, 1961, concerning the inclusion of a tax refund in the revenue account of the Life Insurance Corporation of India for the assessment year 1963-64. The Court held that the refund of Rs. 23,959/- should not be included as it pertained to the predecessor's tax liabilities prior to the Corporation's formation, thus establishing that adjustments under Rule 2(1)(b) must relate to the Corporation's own surplus or deficit. The appeal was allowed in favor of the assessee, overturning the High Court's decision on the seventh question.