COMMISSIONER OF INCOME-TAX, BOMBAY CITY-1 versus GODAVARI SUGAR MILLS LTD.

Citation: [1967] 1 S.C.R. 798 · Decided: 10-10-1966 · Supreme Court of India · Bench: J.C. SHAH · Disposal: Dismissed

Cited by 1 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

COM.\IISSIONER OF INCOME-TAX, BOMBAY CITY-1 
A 
\'. 
GODA.VARI SUGAR MILLS LTD. 
October 10, 1966 
(J. C. SHAH, V. RAMASWA~ll A!'ID V. BHARGAVA, JJ.j 
Income Tax Act, 1922, s. 23A-Company resrricred from 
dtclarlnt 
dividend to limit prescribed by ss. 3 and 12 of Public Companits (Limlt<>-
rion of Dividends) Ordinance 1948-Therefore nor declaring dividend aJ 
annual general meeting as contemplated in s. 23A.-Public 
CompanJu 
(Limitation of Dividends) Act, 1949 repealing Ordinance within •ix months 
of meeting nor applicable ro assessee company-Wheth!r order under 1. 
23A valid-Whether repealed Ordinance applied on date of meetln11 by 
virtue of s. 6(r), (d) and (<) GeMral Clauses Act, 1897. 
At its annual general meeting held on December 13, 1948 the respon-
dent company declared a dividend of Rs. 3,68,433 for its accounting year 
ended May 31, 1948. 
Jn the course of its assessment to income-tax for 
the assessment year 1949-50 the Income-tax Officer passed an order on 
March 11, 1955, under the provisions of s. 23A of the Income-tax Act, 
1922, that an undistributed portion of the assessable income of the res-
pondent would be deemed to have been distributed as dividend amongst 
the share-holders as at the date of the general meeting. 
The respondent raised an obj•ction that it was not legally possible for 
it to declare a higher dividend than that declared in view of ss. 3 and 12 
of the Public Companies (Limitation of Dividends) Ordinance No. XXIX 
of 1948. This objection was rejected by the Income-tax Officer 
whose 
view was confirmed in appeal by the Appellate Assistant Commissioner and 
also by the Tribunal. Thereafter, a reference was made to the High Court 
on the question whether the order under s. 23A was validly made in tho 
case of the respondent company to which the Ordinance applied on the 
date of the annual general meeting. but to which the Public Companieo 
(Limitation of Dividends) Act, 1949, which repealed the Ordinance, cea5-
cd to apply within the period of 6 months referred to in s. 23A(I). The 
High Court decided the question in favour of the respondent. 
Jn the appeal to this Court it was contended on behalf of the appel-
lant that (i) s. 23A contemplated the 
declaration of dividend not only 
on the date of the aonual general meeting but also at any further point of 
time withifl _B period of 6 mon:h9 thereafter and lhat :1 was possible for the 
respondent company to declare a further dividend within the said period of 
6 months; (ii) that in any event s. 13 of 1949 Act repealed the Ordinance 
completely and the effect wa' that the Ordinance was obliterated from the 
¥tatutc book, a.~ if it never existed, and therefore, there was no bar in the 
way of the Income-tax Officer making the order of March 11, 1955. 
HELD : (i) As the Ordinance was in force on the date of the annu.i 
general meeting of the respondent company, the Income-tax Officer had no 
power to pass any order under s. 23A. 
B 
c 
D 
E 
F 
G 
The order which the Income-tax Officer is cmpov.·ercd to make under 
1-1 
s. 23A is that the undistrihutcd income shall be deemed to have been dis-
tributed amon~st the •hareholdcrs "as at the date of the annual general 
meeting." If, 10 actuality, a higher dividend could not lawfully have. been 
r 
"
A 
B 
c 
D 
E 
-· 
F 
G 
H 
c.I.T. v. GODAVARI MILLS (Ramaswaml, J.) 
799 
declared by the respondent, the Income-tax Officer could not pass an order. 
that ouch higher dividend should· be deemed to have been declared, for 
the deemed declaration will suffer from the same legal restriction which an 
actual declaration is subject to. The prohibition imposed by s. 3 of the 
Ordinance applies not only to the actual dividend declared but also to the 
notional dividend deemed to have been declared under s. 23A Of the Act. 
There is a manifest repugnancy between the provisions of the Ordinance 
and of s. 23A of the Act and it must be taken that there was an im-
plied ~peal of s. 23A of the Act to the extent of that repugnancy so long 
as the Ordinance remained in force. · [803 C..FJ 
Raghunandan Neotia v. Swad.,hi Cloth Dealers Ltd., 34 Com. Cas. S70; 
East End Dwellings Co. Ltd. v. Finsbury Borough Council; [1952] A.C. 
109, 132; referred to. 
· 
· 
Since the notional distribution contemplated by s. 23A is as if the 
notional distribution took place at the date of the annual general meeting, 
it i• the law which prevailed as on that date which is to be taken into 
account in considering the legal

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