HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE
Commissioner of Income-tax, Bombay City-I v. Godavari Sugar Mills Ltd.
Civil Appeal No. 28 of 1966
[1967] 1 SCR 798 ·
Indian Income-tax Act, 1922: section 23A · Public Companies (Limitation of Dividends) Ordinance, 1948: sections 3 and 12 · Public Companies (Limitation of Dividends) Act, 1949: sections 2(3)(i) and 13 · General Clauses Act, 1897: section 6(c), (d) and (e)
Sources & disclosures includedDownload original judgment / order
3-judge bench · J. C. Shah, J. · V. Ramaswami, J. · V. Bhargava, J.
Assessment years: 1949-50
01 · Facts of the case
Godavari Sugar Mills Ltd.'s accounting year ended on 31 May 1948. At its annual general meeting on 30 December 1948 it declared Rs.3,68,433 as dividend, complying with the ceiling then imposed by the Public Companies (Limitation of Dividends) Ordinance, 1948. For AY 1949-50, however, the Income-tax Officer made a 1955 order under section 23A deeming additional undistributed assessable income to have been distributed as dividend at that meeting. The departmental authorities upheld the order; the Bombay High Court answered the referred question for the company, and the Commissioner appealed.
Source: Accounting period, meeting, dividend and section 23A proceedings: SCR pp.799-801 / PDF pp.2-4
02 · Discussion by the Hon’ble Court
Section 23A deemed the undistributed income to have been distributed by the company as dividend on the date of the annual general meeting. Because the 1948 Ordinance was in force on that date and prohibited a higher actual dividend, its restriction also constrained the fictional dividend: the tax officer could not deem the company to have done what it then could not lawfully do. The provisions were repugnant to that extent while the Ordinance operated. The later 1949 Act did not remove this conclusion. The relevant law was the law on the deemed-distribution date, and section 6(c)-(e) of the General Clauses Act preserved accrued consequences absent a contrary intention in the repealing Act. The Court expressly left undecided the separate argument about declaring an additional dividend within six months after the meeting.
Source: Legal-fiction constraint and implied repugnancy: SCR pp.802-804 / PDF pp.5-7; Repeal, relevant date and General Clauses Act savings: SCR pp.804-806 / PDF pp.7-9
03 · Judicial decision
The Supreme Court affirmed the Bombay High Court and dismissed the Commissioner's appeal with costs. The section 23A order could not validly create a notional dividend at a date when the Ordinance prohibited the corresponding actual declaration.
Source: General Clauses Act conclusion and operative dismissal: SCR p.806 / PDF p.9
04 · Outcome / in whose favour
In favour of the assessee-company. The Revenue's appeal was finally dismissed with costs, leaving the High Court's favourable answer and the invalidation of the section 23A order intact.
05 · AKHB REVIEW POINT
AKHB analysis: when a tax provision creates a deemed transaction at a specified historical date, test the fiction against every legal restriction then operative; the fiction ordinarily carries necessary incidents of the imagined event but does not authorise an unlawful act. For any repeal issue, separately identify the relevant statutory date, the repealing provision, the General Clauses Act saving and any contrary intention. This judgment's practical lesson is interpretive only because the governing tax and dividend-control provisions are obsolete.
Source: AKHB analysis based on the legal-fiction and repeal reasoning
Source & verification
Download original judgment / order · Open cited source rendition
Full 9-page SCR report read; the editorial headnote on PDF pp.1-2 was distinguished from Ramaswami J.'s unnumbered opinion beginning on PDF p.2. The opinion, rather than the headnote, was used for the annual-general-meeting date.
- Exact source bytes, SHA-256 and nine-page count match catalogue asset 1967_1_798_806; all pages were read and visually checked.
- The report verifies Civil Appeal No. 28 of 1966, the 10 October 1966 decision date and the three-member bench.
- The Court did not decide whether section 23A independently permitted a further dividend after the annual general meeting; it resolved the appeal on the law operating at the deemed-distribution date and the repeal-saving point.
Statutory scope
The ruling applies section 23A of the repealed Indian Income-tax Act, 1922 and temporary dividend-control legislation governing the 30 December 1948 meeting. No current-law analogue under the Income-tax Act, 1961 or Companies Act, 2013 has been verified.
Later treatment
Source checked 2026-10-10. Later treatment of section 23A legal fictions, repeal savings and implied repugnancy has not been comprehensively checked; no current citator clearance is represented.
Page references identify the supplied PDF; paragraph references identify the judgment unless stated otherwise.
Coverage, AI disclosure & professional disclaimer
Selected Supreme Court income-tax decisions and procedural orders checked against their identified sources. This collection is not exhaustive. The research catalogue has 2,569 indexed PDF assets, including alternate copies and incidental matches; that is not a count of unique or reviewed judgments. Historical and unreported coverage remains open.
AI-assisted research checked against the identified source. Extraction, interpretation or omission errors remain possible. Source review does not mean independent approval by a practising professional. Verify every material statement against the complete original judgment.
General research information only; not legal or tax advice, a certified judgment or a substitute for the full order. Applicability depends on facts, assessment year, statutory version and jurisdiction. Subsequent treatment is unverified unless a note expressly identifies the sources checked. Downloading does not create a professional engagement. Obtain case-specific advice before reliance.
The official 1961–2025 structural correspondence does not establish that a precedent applies under the new Act. Verify the enacted wording, commencement and transitional provisions separately.