SC pulls up income tax for late filing of cases, junks plea against Xerox for 290-day delay

Supreme Court on ease of doing business

The Supreme Court on July 10 refused to entertain an appeal by the income tax department against the Indian arm of the multinational giant Xerox. The plea was 290 days beyond the limit prescribed by the law.

"They (MNCs) invest in India, create jobs and revenue. They should be able to trust the courts in the country," Chief Justice of India DY Chandrachud said. Essentially, the CJI noted that the courts will have to be fair when cases are filed late and not permit them to go on, especially when they pertain to revenue.

The CJI further noted that the government departments, pursuing litigations late is not in the interest of India's investment climate. He noted that pursuing litigation on time also constitutes an important part of the ease of doing business.

The limitation period for filing appeals in the Supreme Court against high court judgments is a maximum of 60 days. When a case is filed beyond the 60-day period, it is the discretion of the Supreme Court to entertain the plea. The courts have entertained belated pleas in the past, however, they need to satisfy the court on the reason for filing the plea late.

Among the Union ministries, the finance ministry is fighting the highest number of cases in court. As of July 2023, the ministry was fighting over 1.5 lakh cases. The majority of these litigations are directly attributable to taxes. Time and again, budgetary announcements are made to reduce tax disputes pending in court.

In 2019, the finance ministry increased the limit for filing appeals by the income tax department. For appeals before the Income Tax Appellate Tribunal (ITAT), the limit was enhanced to Rs 50 lakh, and for appeals before high courts, it was enhanced to Rs 1 crore, while for special leave petitions (SLPs)/appeals before the Supreme Court, the limit was increased to Rs 2 crore. Thus, if the amount in dispute is less than that is mentioned above, the department cannot file an appeal.

Despite this, the income tax department files many cases late. In January 2024, the SC expressed shock and surprise over the department filing an appeal four years late.

What was the case about?

The case pertained to taxation of marketing expense of the company for assessment year 2008-09. It questioned whether the marketing expense incurred by Xerox would amount to international transaction.

Both the Income Tax Appellate Tribunal (ITAT) and the Delhi High Court ruled against IT department's contention and dismissed the plea.