HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE
Mazagaon Dock Ltd. v. Commissioner of Income-tax and Excess Profits Tax
Civil Appeal No. 381 of 1956
[1959] 1 SCR 848 ·
Indian Income-tax Act, 1922: section 42(2)
Sources & disclosures includedDownload original judgment / order
3-judge bench · T. L. Venkatarama Aiyar · P. B. Gajendragadkar · A. K. Sarkar
Assessment years: Account years 1943-44 to 1945-46 (income-tax branch limited to 1944-45 and 1945-46)
01 · Facts of the case
An Indian ship-repair company was wholly beneficially owned by two non-resident shipping companies. Under their arrangement it repaired their vessels at cost without profit. The Revenue assessed ordinary profits deemed to arise from that arrangement.
Source: Primary report: SCR 849–851
02 · Discussion by the Hon’ble Court
Section 42(2) charged the resident’s business profits, including notional profits suppressed by the close connection, rather than the non-residents’ profits. Organised and continuous ship repairs under a special at-cost agreement constituted carrying on business with the resident; the absence of profits to the non-resident was immaterial.
Source: Primary report: SCR 852–859
03 · Judicial decision
The statutory conditions were satisfied and deemed profits were assessable in the resident company’s hands.
Source: Primary report: SCR 859–860
04 · Outcome / in whose favour
Assessee appeal dismissed with costs; the High Court’s answer sustaining the charge remained.
Source: Primary report: SCR 860
05 · AKHB REVIEW POINT
Separate the resident’s foregone business profit from any saving or profit of its non-resident owners. Apply the actual historical charging provision; this is not a clearance of modern transfer-pricing requirements.
Source: Primary report: SCR 853–857
Source & verification
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Statutory scope
Historical legislation expressly identified in this note. This is not a decision under the Income-tax Act, 1961 or the Income-tax Act, 2025. Verify enacted wording, commencement, transition and subsequent judicial treatment independently before modern reliance.
Later treatment
Source checked 2026-10-23. Subsequent treatment and present-law applicability have not been comprehensively checked.
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