Leader of the council, Paul Follows, said: “Members of the executive will be well aware of the Cornish Fisher Folk painting that we have in our possession.
“This is not a joke item, this is very much a real painting that the council possesses.”
Investigations discovered the picture was sold in 1910 for £100.
After the owner passed away, it was given to a second owner who subsequently bequeathed it to Godalming Parish Council, a forerunner of WBC in 1920.
In 1974, when the borough was created, Cornish Fisher Folk was given to Waverley, with other paintings allotted to Godalming Town Council.