HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE
Padmavati R. Saraiya and Others v. Commissioner of Income Tax, Bombay City-I
Civil Appeals Nos. 704 to 715 of 1963
[1965] 1 SCR 307 ·
Indian Income Tax Act, 1922: sections 16(2), 34 and 49AA · Indo-Pakistan Agreement for Avoidance of Double Taxation dated 10 December 1947: articles IV and VI
Sources & disclosures includedDownload original judgment / order
3-judge bench · K. Subba Rao, J. · J. C. Shah, J. · S. M. Sikri, J.
Assessment years: 1949-50, 1952-53, 1953-54
01 · Facts of the case
Shareholders received dividends from a company earning profits in India and Pakistan. They sought abatement under the 1947 agreement but did not produce Pakistan assessment certificates. For a later dividend, the company resolved to pay one moiety immediately and the other only after Pakistan remittances became free and funds were received; Revenue included the entire declared amount.
02 · Discussion by the Hon’ble Court
The Court held that the agreement did not prevent either Dominion from assessing under its own law; it restricted retention through abatements allocated by the schedule. Article VI required proof of the other Dominion’s assessment, which the assessees lacked. On section 16(2), payment or credit required the dividend to be unconditionally available to the member. Crediting the total to a general dividend account while the second moiety remained contingent did not meet that test.
03 · Judicial decision
All cross-appeals were dismissed without costs. The assessees received no treaty abatement on the available record, while the deferred Pakistan-linked moiety was excluded from the relevant year’s total income.
Source: Holding and operative order
04 · Outcome / in whose favour
Mixed. Revenue prevailed on the abatement issue; the assessees prevailed on timing of the deferred dividend.
Source: Operative result
05 · AKHB REVIEW POINT
AKHB analysis: treaty-relief files require procedural proof as well as substantive allocation. For dividend timing, retain the resolution, ledger posting, payment conditions and evidence of when funds became unconditionally available to each shareholder.
Source & verification
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Statutory scope
The judgment applies the 1947 Indo-Pakistan arrangement and section 16(2) of the 1922 Act. It is not guidance on a current tax treaty, foreign-tax credit rule or dividend regime.
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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