SC Rejects Income Tax Appeal Against Xerox Due to 290-Day Delay | July 2024

On July 10, the Supreme Court of India refused to entertain an appeal by the Income Tax Department against Xerox’s Indian subsidiary, citing a 290-day delay beyond the legally prescribed limit.

Chief Justice of India DY Chandrachud emphasized that multinational companies investing in India and creating jobs and revenue should be able to trust the country’s judicial system. He underscored the importance of courts being fair and not permitting excessively late cases, especially those related to revenue.

The CJI also highlighted that government departments pursuing litigation late hampers India’s investment climate and that timely litigation is crucial for 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. Appeals filed beyond this period are at the discretion of the Supreme Court. While the courts have accepted belated pleas in the past, they must be justified by the reason for the delay.

Among Union ministries, the finance ministry has the highest number of ongoing court cases, with over 1.5 lakh cases as of July 2023, primarily related to taxes. Efforts have been made through budgetary announcements to reduce these tax disputes.

In 2019, the finance ministry raised the threshold for filing appeals by the Income Tax Department: Rs 50 lakh for appeals before the Income Tax Appellate Tribunal (ITAT), Rs 1 crore for appeals before high courts, and Rs 2 crore for special leave petitions (SLPs) or appeals before the Supreme Court. Appeals cannot be filed if the disputed amount is below these limits.

Despite these measures, the Income Tax Department continues to file many cases late. In January 2024, the Supreme Court expressed shock at the department filing an appeal four years late.

Case Background

The case involved the taxation of Xerox’s marketing expenses for the assessment year 2008-09, questioning whether these expenses constituted an international transaction. Both the Income Tax Appellate Tribunal (ITAT) and the Delhi High Court ruled against the Income Tax Department, dismissing the plea.