HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE
Godrej & Company, Bombay v. Commissioner of Income-tax, Bombay
Civil Appeal No. 183 of 1956
[1960] (1) SCR 527 ·
Indian Income-tax Act, 1922: capital/revenue receipt; section 66(1)
Sources & disclosures includedDownload original judgment / order
3-judge bench · S. R. Das, C.J. · N. H. Bhagwati · M. Hidayatullah
Assessment years: 1948-49
01 · Facts of the case
A thirty-year managing agency was modified to reduce remuneration to 10% of net profits for the remaining term. The agent received Rs.7,50,000 compensation in 1947 for releasing the company from the higher remuneration obligation; Revenue treated it as income.
Source: Primary report: SCR 529–532
02 · Discussion by the Hon’ble Court
The Court distinguished ordinary trading-contract compensation from enduring deterioration of a managing agency as the profit-making apparatus. Continued agency did not preclude a capital injury. It also cautioned that a payer’s capital expenditure does not invariably mean capital receipt for the recipient.
Source: Primary report: SCR 532–536
03 · Judicial decision
The compensation was for enduring injury to the agency rights, not advance remuneration making up future commission differences, and was a capital receipt in the agent’s hands.
Source: Primary report: SCR 535–537
04 · Outcome / in whose favour
The assessee’s appeal was allowed; the High Court answer was reversed and the reference answered negatively, with costs in both courts.
Source: Primary report: SCR 537
05 · AKHB REVIEW POINT
Read the changed rights and enduring effect, not merely the compensation label or continuation of services. The holding concerns this historical managing-agency asset and does not clear modern termination/modification receipts from specific tax provisions.
Source: Primary report: SCR 533–536
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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General legal and tax research only; not legal or tax advice. Verify the complete judgment, applicable statutory version and subsequent treatment before reliance. AKHB REVIEW POINT is editorial analysis, not the Court’s holding.