Supreme Court Judgments — 2025

The Supreme Court held that the non-compete fee paid by the assessee was a capital expenditure and not eligible for depreciation under Section 32(1)(ii) of the Income Tax Act. The Court also addressed the issue of interest on borrowed funds advanced to a sister concern, affirming its allowability as a business expenditure based on commercial expediency.

The Supreme Court held that Section 44C applies to all 'head office expenditure', whether common or exclusive, and that the definition of 'head office expenditure' requires satisfying a tripartite test.

The Supreme Court held that the deduction under Section 36(1)(viii) is strictly for profits derived from the business of providing long-term finance. Dividend income, interest on short-term deposits, and service charges on government-funded loans do not meet this strict definition.

The Supreme Court held that the CESTAT misdirected itself by emphasizing the distinct identities of Unit No.1 and Unit No.2, thereby ignoring that both units were collectively involved in the process of manufacturing cotton fabrics from grey fabrics. The Court found that the activities, commencing from bleaching and mercerizing at Unit No.1, proceeding to squeezing and stentering at Unit No.2, and culminating in bailing and packing at Unit No.1, constituted integral processes in the conversion of grey fabrics into cotton fabrics. The fact that the units undertaking these processes were exclusive to each other did not make a difference. The Court reasoned that if the various processes were so interlinked that the end product could not be brought about without each individual process, then the entire activity amounted to "manufacture" under Section 2(f) of the Act of 1944. The Court also noted that the CESTAT's observation regarding the process of stentering at Unit No.2 not making a difference because the demand was not confirmed against it, ignored the fact that the entire process of manufacture had to be considered. The Order-in-Original, which considered the entire process as one and fastened liability on Unit No.1, was deemed correct. The CESTAT's error was in bifurcating the continuous process. The Court quashed the CESTAT's order and restored the Commissioner's Order-in-Original.

The Supreme Court held that the value of duty-paid bought out items delivered directly at the buyer's site is not includible in the assessable value of the boiler cleared in CKD condition. It was also held that the show cause notice invoking the extended limitation period was not legal and valid.

The Supreme Court held that the respondent's transactions did not fall under the definition of 'Real Estate Agent' or 'Real Estate Consultant' under the Finance Act, 1994. The Court also found that the extended period of limitation was not justified as there was no deliberate suppression of facts.

The Supreme Court held that a temporary lull in business does not amount to cessation of business, and continuous correspondence and bidding efforts demonstrate an intention to carry on business. The High Court's restrictive interpretation was set aside.

The Supreme Court held that for a levy of tax under Section 3F(1)(b) of the Act, 1948, three conditions must be met: (i) a works contract must exist, (ii) the goods must be involved in the execution of the works contract, and (iii) the property in those goods must be transferred to a third party. The Court found that printing lottery tickets constitutes a works contract, and the ink and chemicals used were involved in its execution. Crucially, the Court determined that there was a transfer of property in the ink and chemicals, as they become incorporated into the final printed lottery ticket. The diluted ink, a composite of ink and chemicals, is tangibly transferred. Therefore, all three conditions were fulfilled, making the appellant liable for tax on the ink and processing material. The Court dismissed the appeals, upholding the High Court's decision.

The Supreme Court held that services provided by the Airports Authority in any airport fall under the definition of 'taxable service' under Section 65(105)(zzm) of the Finance Act, 1994. The exclusion of 'handling of export cargo' from 'cargo handling service' does not exempt it from being a taxable service.

The Supreme Court held that the process of placing the Genset in a container and adding integral components resulted in a new, distinct, and marketable commodity, thus amounting to 'manufacture' under the Act.

The Supreme Court held that the prosecution was lodged in defiance of circulars and the Settlement Commission's findings were conclusive. The conduct of the revenue authorities lacked fairness and reasonableness.

The Supreme Court held that the respondent could not have issued the impugned provisional attachment orders dated November 13, 2024, and December 18, 2024, as the previous orders had ceased to have effect by operation of law after one year of their issuance. The Court reasoned that while other tax statutes like the Customs Act and Excise Act provide for extensions, the CGST Act, specifically Section 83, does not contain any provision for extension, renewal, re-issuance, or revival of a provisional attachment order after its lapse. The Court noted the incongruity of the revenue's actions and the GST Council's acknowledgment of the misalignment between Section 83(2) of the CGST Act and Rule 159(2) of the CGST Rules, which led to recommendations for amendments. The Court emphasized that until such amendments are carried out, actions must strictly comply with the statute. The appeal was allowed, with the direction that the attached bank accounts shall stand de-freezed and be made operable forthwith. The Court explicitly stated that the issue of delegation and assumption of jurisdiction was not considered due to the orders being liable to be set aside on the point of law discussed. The investigation by the respondent can continue as per law, but this order is restricted to the issue agitated.

The Supreme Court held that Section 6(2)(b) of the CGST Act bars a proper officer from initiating proceedings on a subject matter if another proper officer under the State or Union Territory Act has already initiated proceedings on the same subject matter. However, the Court clarified that the issuance of summons under Section 70 of the CGST Act is a tool for gathering information, documents, or statements during an inquiry into suspected tax evasion. Such summons, or the inquiry stage, does not constitute 'proceedings' within the meaning of Section 6(2)(b). The Court reasoned that at the stage of issuing a summons, the Department is primarily engaged in gathering information to determine if proceedings should be initiated, and the subject matter cannot be definitively ascertained solely through summons. The issuance of a show cause notice, on the other hand, marks the formal commencement of adjudicatory proceedings. Therefore, the mere issuance of summons does not equate to the initiation of proceedings barred under Section 6(2)(b). The High Court was correct in holding that the term 'any proceedings' does not encompass summons issued pursuant to a search or investigation, as the Department is merely gathering information at that stage. The Court also issued detailed guidelines for handling overlapping inquiries by different tax authorities.

The Supreme Court, in a split decision, held that Section 153 of the Income Tax Act and its sub-sections are fully applicable to proceedings under Section 144C. The timelines prescribed in Section 144C must be adhered to, and the time consumed in Section 144C proceedings should be subsumed within the limitation period of Section 153.

The Supreme Court held that the appellant had a fixed place of business in India, constituting a Permanent Establishment (PE) under Article 5(1) of the India-UAE DTAA. The income received under the SOSA was therefore attributable to this PE and taxable in India.

The Supreme Court held that the proper officer is under a clear statutory obligation to pass a final order under Section 129(3) of the CGST Act, 2017, in Form GST MOV-09 and DRC-07, even if tax and penalty have been paid. The Court reasoned that objections were filed, and the payment was made under protest due to business exigencies, indicating a dispute. The deeming fiction under Section 129(5) does not absolve the officer of this duty; it merely signifies that no further prosecution proceedings will be initiated. The absence of a reasoned order deprives the taxpayer of their statutory right to appeal under Section 107, rendering it illusory and violating principles of fairness and due process, as well as Article 265 of the Constitution. The Court emphasized that payment under commercial compulsion cannot be treated as voluntary or a waiver of the right to challenge the levy. Therefore, the High Court's refusal to direct the passing of such an order was set aside, and the respondent was directed to pass a reasoned final order within one month.

The Supreme Court held that interest on penalties imposed by the Adjudicating Officer is payable by the appellants and accrues from the expiry of the 45-day compliance period stipulated in the Adjudicating Officer's orders dated August 28, 2014. The Court reasoned that the Adjudicating Officer's order itself constituted an enforceable demand for payment within 45 days. Once this order attained finality after the appellants' unsuccessful challenges, the obligation to pay the penalty revived from the date of adjudication. Under Section 220(1) of the Income Tax Act, read with Section 28A of the SEBI Act, interest becomes payable upon failure to meet the demand within the prescribed time, rendering the appellants 'defaulters' under Section 220(4). The Court clarified that Section 156 of the Income Tax Act is not incorporated into the SEBI Act, and therefore, the original adjudication order must be treated as the statutory trigger for interest calculation. The demand notice dated May 13, 2022, was considered a mere reiteration, not a fresh liability trigger. The Court also held that Explanation 4 to Section 28A, inserted in 2019, merely clarified the existing legal position and did not introduce a substantive change. Interest is compensatory, not penal, and accrues automatically upon default. The appeals were dismissed, and the appellants were directed to pay the calculated interest within 15 days of receiving the judgment.

The Supreme Court held that the appellant's services, including enrolment, collection, processing, and storage of umbilical cord blood stem cells, are indeed well within the ambit of 'Healthcare Services' as defined under the relevant exemption notifications. The Court reasoned that the appellant qualifies as a clinical establishment, and its core activities are preventive and curative in nature, with potential applications for life-threatening diseases. The processing, testing, and cryopreservation are integral components of healthcare. The Court also noted the recognition under the Drugs and Cosmetics Act and the Ministry of Health and Family Welfare's 2013 Office Memorandum supporting the classification of stem cell banking as healthcare services. Furthermore, the Court found that the show cause notice issued by the department was time-barred under Section 73(1) of the Finance Act, 1994, as there was no evidence of fraud, collusion, wilful misstatement, or suppression of facts with intent to evade tax, which are conditions precedent for invoking the extended period of limitation. The appellant acted under a bona fide belief that its services were exempt. Consequently, the imposition of penalties and interest was held to be unsustainable. The impugned order was set aside, and the deposit of Rs. 40,00,000/- made by the appellant was ordered to be refunded.

The Supreme Court held that the services provided by the appellant, namely the enrolment, collection, processing, and storage of umbilical cord blood stem cells, fall within the ambit of 'Healthcare Services' as contemplated under Notification No. 25/2012-ST. The Court relied on the Office Memorandum dated 22.05.2013 issued by the Ministry of Health and Family Welfare, which, in consultation with the National AIDS Control Organization, clarified that stem cell banking is part of 'healthcare services' and may be considered for exemption. The Court found this O.M. to be a significant piece of evidence supporting the appellant's claim. The Court also noted that the insertion of Entry 2A by Notification No. 4/2014-ST was not meant to exclude services previously covered. Furthermore, the Court found that the appellant acted in good faith, seeking clarifications from the authorities and disclosing all relevant information. Consequently, the imposition of penalties and interest was deemed unwarranted and arbitrary. The impugned order of the CESTAT was set aside, and the appeals were allowed. The deposit of Rs. 40,00,000/- made by the appellant was ordered to be refunded.

The Supreme Court held that both the Parliament and the State Legislatures have the legislative competence to levy taxes on the activity of broadcasting. The Court applied the "aspect theory" to conclude that different facets of the same activity can be taxed by different legislatures. The act of broadcasting was considered a service liable to service tax under Entry 97 of List I (Union's competence), while the provision of entertainment through broadcasting was considered a luxury falling under Entry 62 of List II (State's competence). Therefore, assessees are liable to pay both service tax and entertainment tax. Regarding the Allahabad High Court's ruling on the UP Act, the Supreme Court partly allowed the appeal, holding that amendments to the UP Act of 1979 could not be construed as a clarification to retrospectively include DTH services, which represented a new technology. Concerning the Kerala High Court's judgment on luxury tax, the Supreme Court found it incorrect. It held that the High Court should not have struck down the levy as discriminatory but could have directed all cable TV operators to pay the tax. Consequently, the paragraph of the Kerala High Court's judgment was set aside, the assessee's writ petition was dismissed, and the State of Kerala's civil appeal was allowed. The Court found no overlapping in fact or law as different aspects of the same activity were being taxed under different legislations by different legislatures.

The Supreme Court held that on a plain reading of Section 80-IA(9), if a deduction of profits and gains under Section 80-IA is claimed and allowed, then the deduction to the extent of such profits and gains cannot be allowed under any other provision under Heading 'C' of Chapter VI-A. However, the restriction under Section 80-IA(9) is not on the computation of gross total income. It restricts the allowability of deductions under any other provision under Heading 'C' to the extent of the deduction claimed under Section 80-IA. The provision does not affect the computability of deductions under various provisions of Heading C, but it affects their allowability, ensuring that the aggregate deduction under Section 80-IA and other provisions under Heading C does not exceed 100% of the profits of the assessee's business. The Court found the interpretation of the Bombay High Court in Associated Capsules (P) Ltd. v. Deputy Commissioner of Income Tax and Anr. to be logical and correct. The reference was answered in line with this interpretation.

The Supreme Court held that Section 80-IA(9) does not bar the computation of deductions under Section 80-HHC by reducing the gross total income. The deduction under Section 80-HHC should be computed based on the gross total income before allowing deductions under Section 80-IA.

The Supreme Court set aside the High Court's judgment and order. The Court held that the encashment of bank guarantees offered as security cannot be treated as payment of customs duty. Therefore, the doctrine of unjust enrichment and Section 27 of the Customs Act, 1962, are not applicable in this case. The Court noted that the revenue had recovered the differential duty amount by encashing bank guarantees, which were furnished as security on the High Court's orders, without waiting for this Court's decision. This action was considered arbitrary. The Court directed the respondents to immediately refund the amounts covered by the bank guarantees to the appellant, with interest at 6 percent from the dates of encashment till repayment, to be released within four months. The appeals were allowed.

The Supreme Court held that the departmental circular No. 10/2004-Cus. dated 30.01.2004, to the extent it expanded the exclusionary clause in notification No. 53/2003-Cus. dated 01.04.2003, had no legal consequence. The Court found that crude degummed soyabean oil is a product different and distinct in character and identity from soyabean. The process of transforming soyabean into crude degummed soyabean oil was considered manufacturing. Applying the common parlance test and dictionary definitions, the Court concluded that crude degummed soyabean oil is not an agricultural product. Therefore, the appellant was entitled to the benefits under notification No. 53/2003. The High Court's judgment and the Assistant Commissioner's order were set aside. The appeal was allowed, with no order as to costs. The Court did not expressly leave any issue undecided.

The Supreme Court found that the CESTAT had rightly analyzed the activities of the assessees and granted relief. The Court noted that the CESTAT's decisions were based on findings of fact, which were not perverse and did not require re-determination.

The Supreme Court held that the services rendered by the Indian agent were directly relatable to the import of goods and constituted product support services. These services were includable in the assessable value of the imported goods.

The Supreme Court held that the assessments for the period September, 1990 to December, 1992 were regular, and the CESTAT's finding that assessments for January and February, 1993 were provisional was unsustainable. The Court found that the essential requirements of provisional assessment under Rule 9B were not complied with.

The Supreme Court held that dealing in "Buprenorphine Hydrochloride," a psychotropic substance listed in the Schedule to the NDPS Act but not in Schedule I of the NDPS Rules, does constitute an offence under Section 8(c) of the NDPS Act. The Court reasoned that the NDPS Rules do not limit the scope of Section 8(c) to only those substances in Schedule I of the Rules, and that all substances in the Act's Schedule have potential harmful consequences. The Court further held that the decision in Sanjeev V. Deshpande's case, which clarified this interpretation, must be given retrospective effect. The Court reasoned that overruling a decision declares the law as it always stood, and there was no compelling reason to apply it prospectively, especially as it aimed to safeguard public interest and give effect to the Act's object. The Court also held that discharging or deleting a charge under Section 216 CrPC after a charge has been framed under Section 228 CrPC is impermissible in criminal procedure. Consequently, the High Court's orders were set aside, and the accused were directed to be tried by the concerned Special Judge, NDPS, in accordance with law. Acquittals that had attained finality prior to this decision would not be unsettled.

The Supreme Court held that the evidence was inconclusive to definitively classify the imported goods as HSD. Given the time elapsed and the inconclusive test reports, the Court decided to give the benefit of doubt to the appellants.

The Supreme Court held that all dues, including statutory dues owed to the Central Government, if not part of the Resolution Plan, stand extinguished upon the approval of the Resolution Plan by the adjudicating authority under Section 31 of the IB Code. The Court found that the income tax dues for assessment years 2012-13 and 2013-14 were not part of the approved Resolution Plan. Therefore, in view of Section 31(1) of the IB Code, as interpreted by the Supreme Court in Ghanashyam Mishra and Sons Pvt. Ltd., these dues stand extinguished. The Court criticized the NCLAT for brushing aside the binding precedent and the NCLT for dismissing the application without reasons and imposing costs. The Court emphasized that allowing such demands would create roadblocks in implementing the Resolution Plan and prevent the appellants from restarting the CD's operations on a clean slate. Consequently, the demands raised by the Income Tax Department for assessment years 2012-13 and 2013-14 were declared invalid and unenforceable. The impugned orders of the NCLT and NCLAT were set aside.

The Supreme Court held that since the income tax dues for AY 2012-13 and 2013-14 were not part of the approved Resolution Plan, they stood extinguished. Subsequent demands for these years were deemed invalid.

The Supreme Court held that penalty under Section 271AAA was not attracted on the income admitted during the search and tax paid thereon. However, penalty was leviable on the additional income disclosed during assessment proceedings as it was considered undisclosed income found in the course of search.

The Supreme Court held that the amendments made to the Finance Act, 1994, from 2010 onwards, including those in 2012, 2015, and 2016, were unsuccessful in imposing service tax on the activities of the respondent-assessees. The Court reasoned that the amendments did not alter the fundamental nature of the relationship between the State Government and the lottery distributors/purchasers, which remained one of principal-to-principal, not principal-agent. Consequently, the assessees were not providing any 'service' as an agent to the Government of Sikkim, and thus, service tax was not leviable on their transactions. The Court found that the amendments, particularly those defining "transaction in money or actionable claim" and "lottery distributor or selling agent," did not detract from this substantive relationship. The Court also noted that the activity of conducting a lottery is an activity coming within the scope of betting and gambling, regulated under Entry 34 of List II of the Constitution, with taxation under Entry 62 of List II, and that the amendments did not change this constitutional position. The appeals filed by the Union of India were dismissed.

The Supreme Court held that the High Court erred in rejecting the writ petition. The offence under Section 276CC for AY 2013-14 was a 'first offence' under the 2014 guidelines, and the compounding application should not have been rejected on that ground alone.

The Supreme Court held that the extended period of limitation could not be invoked as there was no suppression of facts or wilful misstatement. Consequently, the penalty under Section 11AC was not applicable.

The Supreme Court held that reduction in share capital of a subsidiary company and proportionate reduction in the assessee's shareholding constitutes a transfer under Section 2(47) of the Income Tax Act, 1961. Therefore, the claim for capital loss is allowable.