HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE
J. Dalmia v. Commissioner of Income Tax, New Delhi
Civil Appeal No. 505 of 1963
[1964] 7 SCR 579 ·
Indian Income Tax Act, 1922: sections 16(2) and 66(1) · Indian Companies Act, 1913: section 17(2), First Schedule Table A regulations 95–97 · Govan Bros. (Rampur) Ltd. Articles of Association: articles 73, 74, 77 and 80
Sources & disclosures includedDownload original judgment / order
3-judge bench · K. Subba Rao, J. · J. C. Shah, J. · S. M. Sikri, J.
Assessment years: 1951-52, 1952-53
01 · Facts of the case
The appellant Hindu undivided family held 1,500 shares in Govan Bros. (Rampur) Ltd. Its directors passed an interim-dividend resolution on 30 August 1950, and the appellant received a warrant dated 28 December 1950 for Rs. 4,12,500. Revenue taxed the amount in assessment year 1952-53; the appellant contended for assessment year 1951-52. The Tribunal referred the timing question and the Punjab High Court answered for Revenue (SCR pp.580–581; PDF pp.2–3).
Source: Primary judgment: facts
02 · Discussion by the Hon’ble Court
Section 16(2) assigned dividend income to the previous year in which it was paid, credited, distributed or deemed so. Govan Bros.’ special articles authorised directors to declare interim dividend, but that wording did not make their resolution equivalent to a company’s final declaration in general meeting (SCR pp.581–583; PDF pp.3–5). A directors’ interim resolution could be rescinded before payment and created no enforceable shareholder debt. There was no evidence of an earlier credit, distribution, irrevocable implementation or statutory deeming event (SCR pp.583–584; PDF pp.5–6). The Court rejected mere due-ness as the timing test: payment meant discharge of the company’s liability and unconditional availability, and a rescindable resolution did not meet that standard (SCR pp.585–586; PDF pp.7–8).
Source: Primary judgment: discussion
03 · Judicial decision
The Court affirmed the High Court’s answer, holding that the interim declaration did not operate as payment before the company parted with the amount or otherwise discharged its obligation. The appeal was dismissed with costs (SCR p.586; PDF p.8).
Source: Primary judgment: decision
04 · Outcome / in whose favour
In favour of Revenue. The interim dividend was taxable in assessment year 1952-53 on the facts and historical section 16(2), rather than in the earlier year urged by the assessee (SCR pp.580 and 586; PDF pp.2 and 8).
Source: Primary judgment: outcome
05 · AKHB REVIEW POINT
AKHB analysis: build a dated record of the board resolution, any general-meeting action, entries in company books, segregation of funds, revocation power, unconditional availability and actual warrant or transfer. Classify the dividend and apply the governing year-specific timing rule; this 1922 Act result is not current-law clearance (based on SCR pp.581–586; PDF pp.3–8).
Source: Primary judgment: reviewPoint
Source & verification
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Statutory scope
The Court construed section 16(2) of the 1922 Act before its deletion from 1 April 1960 and historical company articles. It does not clear the timing of dividends under later or current tax and company legislation.
Later treatment
Source checked 2026-10-10. Later judicial treatment and current statutory applicability have not been comprehensively checked; no current-law or citator clearance is represented.
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