Pre-incorporation trading losses cannot be taxed in a company's hands; only post-incorporation business loss is allowable.

A company incorporated on 29 May 1951 could not claim the entire trading loss for the full year 1951 because income-tax liability attached only to business actually carried on after incorporation. A promoter's agreement allocating earlier profits and losses to the company could govern rights between the parties, but it could not extend the company's statutory tax liability to pre-incorporation trading. The special provisions for representative or exceptional cases did not alter that result. The company was allowed to claim only any loss relating to the post-incorporation period, and the reference was answered against the assessee.

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Issues: Whether the entire trading loss for the period from 1 January 1951 to 31 December 1951 could be allowed in the hands of the assessee company, including the period before its incorporation.

Analysis: The company was incorporated only on 29 May 1951 and could be liable under the income-tax law only in respect of business carried on by it after coming into existence. An agreement by a promoter with the vendor that profits and losses from an earlier date would be borne by the company could regulate rights inter se, but it could not enlarge the statutory liability to tax or convert pre-incorporation trading into business carried on by the company for income-tax purposes. The statutory scheme required the assessee to be the person who actually carried on the business, and the special provisions dealing with representative or special cases did not justify charging the company for a period before incorporation.

Conclusion: The entire loss for the full year was not allowable in the hands of the assessee company. The company could claim only such loss, if any, as related to the period after its incorporation, and the answer to the reference was in the negative.

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