THE COMMISSIONER OF INCOME-TAX,TAMIL NADU vs CITY MILLS DISTRIBUTORS (P) LTD.

The Supreme Court addressed a reference under Section 257 of the Income Tax Act, 1961, concerning the inclusion of pre-incorporation profits in the assessment of a company for the Assessment Year 1974-75. The Court held that pre-incorporation profits, which accrued before the company's incorporation, cannot be included in the company's assessment as the promoters and the company are distinct legal entities. The Court affirmed the Tribunal's decision to exclude the pre-incorporation profits from the assessment, thereby resolving the conflicting views of the Allahabad and Calcutta High Courts.