COMMISSIONER OF INCOME-TAX, BOMBAY CITY-1 vs. GODAVARI SUGAR MILLS LTD.

CIVIL APPEAL No. 28/1966Supreme Court[1967] 1 S.C.R. 79810 October 1966Bench: 3 JudgesAuthor: J.C. SHAH, V. RAMASWAMI, VISHISHTHA BHARGAVA OF INCOME9 pages
AI SummaryDismissed

What were the facts?

The respondent company, Godavari Sugar Mills Ltd., held its annual general meeting on December 13, 1948, and declared a dividend of Rs. 3,68,433 for the accounting year ended May 31, 1948. For the assessment year 1949-50, the Income-tax Officer, by an order dated March 11, 1955, invoked Section 23A of the Income-tax Act, 1922, deeming an undistributed portion of the company's assessable income as distributed dividend. The company objected, stating it was legally restricted from declaring a higher dividend due to Sections 3 and 12 of the Public Companies (Limitation of Dividends) Ordinance No. XXIX of 1948. This objection was rejected by the Income-tax Officer, the Appellate Assistant Commissioner, and the Tribunal. The High Court, however, ruled in favor of the respondent.

What did the Supreme Court hold?

The Supreme Court held that the order under Section 23A was not validly made. The Court reasoned that as the Ordinance was in force on the date of the annual general meeting, the Income-tax Officer had no power to pass an order under Section 23A. The prohibition imposed by Section 3 of the Ordinance applied not only to actual dividends but also to notional dividends deemed to have been declared under Section 23A. There was a manifest repugnancy between the Ordinance and Section 23A, implying a repeal of Section 23A to the extent of that repugnancy while the Ordinance was in force. The Court also held that Section 13 of the 1949 Act did not obliterate the Ordinance completely from the statute book. By virtue of Section 6(c), (d), and (e) of the General Clauses Act, 1897, the repeal did not affect the previous operation of the Ordinance or anything duly done thereunder, nor did it affect any right, privilege, obligation, or liability acquired, accrued, or incurred under the repealed enactment. Therefore, the law prevailing on the date of the annual general meeting was to be taken into account for determining the validity of the Income-tax Officer's order. The appeal was dismissed.

What were the issues?

1. Whether the order under Section 23A of the Income-tax Act, 1922, was validly made in the case of the respondent company, given that the Public Companies (Limitation of Dividends) Ordinance, 1948, applied on the date of the annual general meeting, but the repealing Act (Public Companies (Limitation of Dividends) Act, 1949) ceased to apply within six months of the meeting. Assessee's contentions: - The company was legally restricted by Sections 3 and 12 of the Public Companies (Limitation of Dividends) Ordinance, 1948, from declaring a higher dividend than what was declared. - Section 13 of the 1949 Act repealed the Ordinance completely, obliterating it from the statute book as if it never existed, thus removing any bar to the Income-tax Officer's order. Revenue's contentions: - Section 23A contemplated the declaration of a dividend not only on the date of the annual general meeting but also at any further point of time within six months thereafter, and it was possible for the respondent company to declare a further dividend within this period.

Which sections of the Income-tax Act were involved?

Section 23A,Section 3,Section 12,Section 13,Section 6

AI-generated summary — verify with the full judgment below

COM.\IISSIONER OF INCOME-TAX, BOMBAY CITY-1 A \'. GODA.VARI SUGAR MILLS LTD.

October 10, 1966 (J. C. SHAH, V. RAMASWA~ll A!'ID V. BHARGAVA, JJ.j Income Tax Act, 1922, s. 23A-Company resrricred from dtclarlnt dividend to limit prescribed by ss. 3 and 12 of Public Companits (Limlt<>- rion of Dividends) Ordinance 1948-Therefore nor declaring dividend aJ annual general meeting as contemplated in s. 23A.-Public CompanJu (Limitation of Dividends) Act, 1949 repealing Ordinance within •ix months of meeting nor applicable ro assessee company-Wheth!r order under 1. 23A valid-Whether repealed Ordinance applied on date of meetln11 by virtue of s. 6(r), (d) and (<) GeMral Clauses Act, 1897. At its annual general meeting held on December 13, 1948 the respon- dent company declared a dividend of Rs. 3,68,433 for its accounting year ended May 31, 1948. Jn the course of its assessment to income-tax for the assessment year 1949-50 the Income-tax Officer passed an order on March 11, 1955, under the provisions of s. 23A of the Income-tax Act, 1922, that an undistributed portion of the assessable income of the res- pondent would be deemed to have been distributed as dividend amongst

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