Criminal Law – Quashing of FIR – Compromise Between Parties – Neighbourhood Dispute – FIR registered for offences under Sections 191(2), 115(2), 352, 351(3), 324(4) BNS, 2023 arising out of a minor altercation between neighbours – During investigation, parties entered into an amicable settlement – Accused approached High Court under Section 482 Cr.P.C. seeking quashing of FIR – High Court declined to quash FIR and merely directed compliance with arrest guidelines under Sections 41 and 41-A Cr.P.C. and Arnesh Kumar guidelines – Held: High Court erred in not exercising inherent powers to quash proceedings despite compromise [Paras 3–6, 11].

Inherent Powers – Section 482 Cr.P.C. – Scope and Object – Inherent power of High Court is of wide plenitude and may be exercised to secure ends of justice or prevent abuse of process of law – Even non-compoundable offences can be quashed where dispute is private in nature and continuation of proceedings would be futile – Principles reiterated from Gian Singh v. State of Punjab [Paras 6–8].

Nature and Gravity of Offence – Civil Flavour – No Societal Impact – Allegations pertained to voluntarily causing hurt, rioting, mischief and criminal intimidation arising out of neighbourhood quarrel – Except offence of rioting, other offences compoundable – No heinous or serious offence affecting society at large involved – Compromise arrived at prior to filing of charge-sheet – Held: Continuation of criminal proceedings would serve no useful purpose [Paras 5, 9–10].

Compromise – Effect on Criminal Proceedings – Where chances of conviction are bleak due to amicable settlement and wrong is essentially personal, quashing of proceedings is justified – Criminal trial in such circumstances would be an exercise in futility and defeat ends of justice [Paras 9–10].

Decision: Appeal allowed – Impugned order of the High Court set aside – FIR No. 152 of 2025 registered at Police Station Bahariya, District Prayagraj and all proceedings arising therefrom quashed – Pending applications disposed of.

Stamp Duty – Agreement to Sell – Tenant in Possession – Deemed Conveyance – A.P. Stamp Act – Appellant tenant in possession of suit property for nearly fifty years entered into agreement to sell with landlady – Trial Court and High Court held agreement chargeable as “sale” under Explanation I to Article 47A – Supreme Court reversed – Held: Mere recital that purchaser was already in possession as tenant does not attract deemed conveyance – Possession must follow from or be referable to agreement to sell – Possession independent of agreement cannot trigger stamp duty as sale [Paras 4.2–4.3, 6.1, 10.1–10.3, 11–11.2].

Explanation I to Article 47A – Interpretation – Nexus with Agreement – Expression “followed by or evidencing delivery of possession” requires delivery of possession to have direct nexus with agreement to sell – Possession may be prior or contemporaneous only if referable to agreement – Long-standing possession as tenant unconnected with agreement falls outside Explanation I [Paras 6.1, 8, 10.1].

Landlord–Tenant Relationship – Agreement to Sell – No Automatic Conversion to Vendor–Vendee – Execution of agreement to sell does not by itself terminate tenancy – No express or implied surrender under Section 111 TPA established – Eviction order passed subsequent to agreement establishes continuance of tenancy – Held: Jural relationship remained that of landlord and tenant [Paras 5, 4.3, 11–11.1].

Express and Implied Surrender – Section 111 TPA – Principles Restated – Express surrender requires mutual agreement and yielding of possession – Implied surrender arises only from conduct inconsistent with continuance of tenancy – Mere execution of agreement to sell without change in character of possession does not amount to surrender [Paras 5.3–5.7, 11.1].

Agreement to Sell – Nature – No Transfer of Title – Agreement to sell does not create any right, title or interest in immovable property – Sale can be effected only by registered conveyance – Agreement to sell simpliciter is not a conveyance and cannot be treated as such for stamp duty unless statutory conditions are met [Paras 5.8–5.10].

Section 53A TPA – Part Performance – Inapplicability – Protection under Section 53A applies only where possession is taken or continued in part performance of contract – Continued possession of tenant independent of agreement does not amount to part performance – Held: Section 53A not attracted where tenancy subsists and possession pre-exists agreement [Paras 5.11–5.13, 10.2–10.3].

Gafoor Case – Distinguished – Ratnamala Approved – In Gafoor, recitals showed implied surrender of tenancy and transformation of tenant into vendee – Hence deemed conveyance applied – Ratnamala correctly overruled Gafoor on facts – Present case distinguishable as no surrender or change of status occurred [Paras 8.1–8.3, 11.2].

Bombay Stamp Act vs A.P. Stamp Act – Statutory Distinction – Explanation I to Article 25 of Bombay Stamp Act materially wider than Explanation I to Article 47A of A.P. Stamp Act – Bombay provision covers possession transferred or agreed to be transferred – A.P. provision requires possession to follow from or be evidenced by agreement – Held: Bombay precedents cannot be bodily imported [Paras 9.6, 10–10.1].

Ramesh Mishrimal Jain – Distinguished – Case decided under Bombay Stamp Act and on application of Section 53A TPA – In present case, tenancy continued and eviction order passed after agreement – Held: Ratio confined to its facts and not applicable [Paras 9.6, 10.3, 12].

Impounding of Document – Improper Exercise – Trial Court erred in directing payment of stamp duty and penalty treating agreement as conveyance – High Court misdirected itself in sustaining order – Held: Agreement to sell liable to be admitted in evidence on stamp duty already paid [Paras 12–12.1].

Decision: Appeals allowed – Orders of Trial Court and High Court set aside – Agreement to sell dated 14.10.2009 held not chargeable as sale or deemed conveyance – Trial Court directed to mark agreement as exhibit and dispose of suit for specific performance expeditiously, preferably within six months – No costs.

Service Law – Waiting/Reserve List – Nature – No Indefeasible Right – Waiting/reserve list is not an independent or perennial source of recruitment – Candidate included in reserve list has no vested or indefeasible right to appointment – Right to be considered arises only if vacancy remains unfilled due to non-joining or resignation of selected candidate and reserve list is alive as per statutory rules – Reserve list operates only as a contingency mechanism and within prescribed validity period – Courts cannot treat waiting list as a reservoir for future vacancies [Paras 81–90].

Public Service Commission – Locus Standi – Maintainability of Writ Appeals – Public Service Commission is a constitutional authority under Articles 315 and 320 – PSC is a “person aggrieved” where judicial directions affect its statutory and constitutional functions – Non-filing of appeal by State Government does not bar PSC from maintaining intra-court appeal – Directions to appoint/consider candidates without PSC recommendation directly prejudice PSC – Division Bench erred in dismissing writ appeals on ground that State had not appealed [Paras 45–79].

Intra-Court Appeal – Scope – Writ appeal is continuation of writ proceedings – Any party adversely affected by decision of Single Judge has right to prefer intra-court appeal – Division Bench required to examine legality and correctness of Single Judge’s order on merits – Failure to do so renders impugned judgment unsustainable [Paras 46–55, 67–69].

Waiting List – Commencement and Expiry – Interpretation of Rules – Rule 24 of Rajasthan Rules, 1981 and Rule 21 of Rajasthan Agriculture Rules, 1978 construed – Commission may recommend names from reserve list only on requisition and within six months from date original list is forwarded – Six-month period is mandatory outer limit – Validity cannot be computed from date of non-joining or cancellation of appointment beyond statutory period – Administrative delay cannot extend life of reserve list contrary to rules [Paras 92–94, 97].

Mandamus – Limits of Judicial Power – Appointment from Waiting List – High Court cannot issue mandamus directing authorities to “pick up” names from waiting list in absence of requisition by appointing authority – Courts cannot compel recommendation or appointment contrary to recruitment rules – Directions issued by Single Judges directing appointment/consideration from expired reserve list held illegal [Paras 88, 91–110].

Article 14 – Equality – Negative Equality Impermissible – Erroneous or illegal appointments made from reserve list do not confer enforceable right on others – No claim of parity or equality can be founded on illegality – Courts cannot compel repetition of illegality under guise of Article 14 [Paras 98–102].

Delay – Expired Reserve List – Effect – Writ petitions filed after expiry of statutory validity of reserve list do not disclose subsisting legal right – Mandamus cannot be issued when right sought to be enforced was not subsisting on date of filing petition – High Court erred in entertaining writ petitions after reserve list had lapsed [Paras 103–105].

Decision: Appeals allowed – Judgments and orders of Single Judges and Division Bench of Rajasthan High Court set aside – Writ petitions dismissed – No direction for appointment or consideration from waiting/reserve list – No costs [Paras 120–122].

Civil Law - Mandatory Injunction – Suit for Removal of Wall – Bar under Section 41(h), Specific Relief Act – Plaintiffs sought mandatory injunction for removal of boundary wall allegedly obstructing access to public road – Serious dispute existed regarding title, possession, and identity of land forming part of Khasra No. 436 – Construction of wall amounted to alleged dispossession – Held: When equally efficacious remedy of suit for possession is available, suit for injunction simpliciter is barred – High Court rightly dismissed suit [Paras 12, 13, 22–24].

Specific Relief Act – Section 41(h) – Equally efficacious remedy – Plaintiffs failed to seek relief of possession despite alleging encroachment and obstruction – Mandatory injunction cannot substitute suit for possession where dispossession is pleaded or implied – Trial Court and First Appellate Court erred in law in granting injunction – High Court’s interference justified [Paras 13, 16, 23].

Civil Procedure Code – Section 100 – Second Appeal – Interference with concurrent findings – High Court entitled to interfere where findings are vitiated by misapplication of settled legal principles and ignoring statutory bar – Findings of courts below held perverse and legally unsustainable – No jurisdictional error committed by High Court [Paras 26–27].

Property Law – Cloud on Title and Possession – Plaintiffs’ title disputed – Sale deed executed jointly by recorded landholder and Maurusee Kashtkar (hereditary tenant) – Tenant had no transferable ownership rights – Identity and exact location of suit land within large Khasra not proved – Mandatory injunction unsustainable without clear identification [Paras 6.2, 12, 24].

Evidence – Identification of Suit Property – Absence of measurements of wall and disputed portion – Amin’s report unreliable and inconsistent – Plaint map vague – Decree for demolition cannot be granted without precise proof of location – Relief rightly refused [Paras 6.3, 24].

Partnership Act – Section 69 – Bar of unregistered firm – Suit not based on contractual rights but protection of property rights – Bar under Section 69 not applicable – Issue correctly decided in favour of plaintiffs but insufficient to sustain decree [Paras 4.3, 25].

Precedents – Applicability – Distinction between permissive possession and disputed title cases – Decisions in Sant Lal Jain and Joseph Severance confined to cases of terminated licensees with no title dispute – Present case governed by principles in Anathula Sudhakar – Suit for injunction simpliciter not maintainable where cloud exists over title and possession [Paras 19–21].

Decision: Appeal dismissed – Judgment and decree of High Court upheld – Suit for mandatory injunction held not maintainable – Parties to bear their own costs [Paras 27–28].

Student Suicides – Mandatory FIR – Institutional Responsibility – Higher Educational Institutions – Supreme Court earlier clarified mandatory registration of FIR on disclosure of cognizable offence in cases of student suicides and reiterated the unequivocal moral and legal obligation of educational institutions to promptly report such incidents – Rising incidents of student suicides across HEIs necessitated structural intervention beyond penal accountability – Held: HEIs cannot shirk their duty to provide safe, inclusive and supportive environments irrespective of individual autonomy of students [Paras 1, 5, 10].

National Task Force (NTF) – Constitution – Scope and Functions – Court constituted a National Task Force to examine causes of student suicides, assess existing legal and institutional frameworks and recommend preventive, remedial and reformative measures – NTF undertook extensive data analysis, stakeholder surveys, institutional visits and consultations across States – Interim report placed before Court highlighting systemic failures and institutional gaps [Paras 3, 11].

Student Mental Health – Structural Inequalities – Marginalised Groups – Students from SC/ST/OBC communities, PwDs, transgender persons, women, rural and non-English backgrounds face disproportionate stressors within HEIs – Affirmative action cannot end at access but must extend to support systems – Tokenistic functioning of Equal Opportunity Cells and Internal Complaints Committees noted – Held: Inclusion must be substantive and institutionalised, not symbolic [Paras 18–22].

Ragging – Academic Pressure – Institutional Stressors – Persistence of ragging despite regulatory frameworks – Normalisation of exploitative academic cultures, rigid attendance norms, faculty shortages, excessive workload and opaque evaluation systems identified as major contributors to distress – Medical and technical institutions found particularly vulnerable – Held: Competitive institutional culture directly impacts student mental health and social isolation [Paras 23–28].

Mental Health Services in HEIs – Treatment Gap – Faculty Limitations – Majority of HEIs lack full-time qualified mental health service providers – Stigma, confidentiality concerns and administrative mistrust reduce service uptake – Faculty members overburdened and ill-equipped to manage crises – Held: Mental health services must be professional, student-centric and confidentiality-driven, not ad-hoc or symbolic [Paras 29–33].

Financial Stress – Scholarships – Administrative Failures – Delays and inconsistencies in scholarship disbursement exacerbate student distress – Institutions imposing adverse academic consequences on students for governmental delays deprecated – Held: No student shall be denied classes, examinations, hostels or degrees due to delayed scholarship payments [Paras 34–35, 45(viii)].

Existing Legal and Policy Framework – Fragmentation – Lack of Accountability – Multiple UGC regulations, national policies and programmes exist but remain scattered and weakly enforced – Absence of implementation roadmaps and consequences for non-compliance identified as major gaps – Held: Binding compliance mechanisms are essential to translate policy into practice [Paras 36–43].

Exercise of Article 142 – Binding Directions to HEIs and Authorities – Supreme Court issued comprehensive directions mandating suicide reporting, data maintenance, faculty recruitment, administrative appointments, medical access, scholarship clearance and strict compliance with UGC regulations – Directions declared binding on all HEIs with accountability to Central and State Governments [Paras 45–52].

Future Framework – SOPs – Well-being Audits – Universal Design – Court directed NTF to prepare model SOPs for well-being audits, faculty sensitisation and mental health services – Objective to create a unified Student Well-being and Suicide Prevention Framework integrating all existing mechanisms – Held: Preventive governance must be measurable, enforceable and integrated into accreditation systems [Paras 47–50].

Decision: Interim directions issued under Article 142 of the Constitution – Union of India and State Governments directed to ensure immediate communication and compliance by all Higher Educational Institutions – Matter to continue for consideration of final report of National Task Force.

Criminal Law – Murder – Burning of Wife – Conviction Restored – Respondent-husband alleged to have poured kerosene and set wife on fire – Trial Court convicted under Section 302 IPC – High Court acquitted by discarding dying declaration on hyper-technical grounds – Held: High Court committed manifest error – Acquittal set aside – Conviction and life sentence restored [Paras 24–27].

Evidence Act – Section 32(1) – Dying Declaration – Evidentiary Value – Dying declaration recorded by Tehsildar-cum-Executive Magistrate after medical certification – Deceased conscious, oriented and capable of making statement – Clear attribution of act to accused – Presence of police officers not fatal – Dying declaration voluntary, truthful and reliable – Can form sole basis of conviction [Paras 16–18, 24].

Criminal Jurisprudence – Appeal Against Acquittal – Scope of Interference – Supreme Court may interfere where High Court’s approach is perverse or based on misreading of evidence – Hyper-technical rejection of reliable evidence leads to miscarriage of justice – Interference justified under Article 136 of Constitution [Paras 13–14, 26].

Hostile Witnesses – Appreciation of Evidence – Testimony of hostile witnesses PW-4 and PW-5 suggesting self-immolation not corroborated by independent evidence – Such testimony cannot override reliable dying declaration – High Court erred in placing undue reliance on hostile witnesses [Paras 20–21].

Defence Evidence – Minor Child as Witness – Limited Evidentiary Value – Defence witness (minor son) did not witness act of burning – Statement only shows post-incident conduct – Attempt to extinguish fire by accused does not exonerate him – Defence evidence insufficient to rebut prosecution case [Paras 21–22].

FIR – Omissions – Effect – Non-disclosure of assailant’s name in earliest version not fatal – FIR not encyclopaedia – Victim critically burnt – Subsequent dying declaration recorded in accordance with law prevails [Paras 19, 24].

Motive – Proof – Relevance – In cases based on direct evidence like dying declaration, proof of motive not mandatory – Evidence of matrimonial discord, abuse and humiliation sufficient – Absence of strong motive not fatal [Paras 23–24].

Dying Declaration – Medical Certification – Law Explained – Medical opinion on fitness is rule of prudence, not absolute requirement – Testimony of Magistrate sufficient if Court satisfied as to mental fitness – Minor inconsistencies immaterial [Paras 16.3, 18].

Decision: Appeal allowed – Judgment of acquittal passed by High Court set aside – Conviction and sentence under Section 302 IPC restored – Respondent directed to surrender forthwith – Pending applications disposed of [Paras 27–28].

IBC – Section 7 – Admission of CIRP – Debt and Default – Mandatory Admission – Financial creditor sought initiation of CIRP against real estate developer – NCLT dismissed petition holding IBC was invoked as recovery mechanism and project was viable – NCLAT reversed and admitted CIRP – Held: Once existence of financial debt and occurrence of default are established, admission under Section 7 is mandatory – Considerations of project viability, stage of completion, receivables, or prejudice to homebuyers are extraneous at admission stage [Paras 12.1–12.7, 12.21–12.22].

Section 7(5)(a) IBC – Discretion – Limited Scope – Vidarbha Industries Exception – Corporate debtor relied on Vidarbha Industries to contend discretionary power to refuse admission – Supreme Court reiterated that Vidarbha Industries is a narrow exception confined to peculiar facts involving adjudicated and realisable counter-claims – Innoventive Industries and E.S. Krishnamurthy reaffirmed as governing law – Held: No discretion survives once debt and default are proved except in rare Vidarbha-type situations [Paras 12.5–12.7].

IBC Not a Recovery Tool – Parallel Proceedings under SARFAESI and DRT – Allegation of misuse of IBC by financial creditor pursuing SARFAESI and DRT remedies – Held: Pendency or initiation of recovery proceedings does not bar invocation of Section 7 – Overriding effect of Section 238 IBC – Allegations of mala fides must be specifically pleaded and proved under Section 65 [Paras 12.11–12.15].

Restructuring / OTS – Default – Effect – Corporate debtor entered restructuring-cum-OTS and defaulted in instalment payments – Revocation of restructuring by financial creditor held contractually justified – Subsequent alleged non-cooperation by creditor cannot erase admitted default – Held: Failure to honour instalments constitutes valid trigger for CIRP [Paras 12.9–12.10, 12.19].

Commercial Wisdom – Committee of Creditors – Non-justiciability – Issues of feasibility, viability, revival, liquidation or project completion fall exclusively within domain of CoC – Courts cannot examine such issues at Section 7 admission stage – Held: Judicial review is limited and commercial wisdom of CoC is non-justiciable except on statutory grounds [Paras 12.16–12.17].

Real Estate Insolvency – Homebuyers’ Interests – Statutory Safeguards – Court acknowledged vulnerability of homebuyers when projects enter CIRP – However, IBC framework provides safeguards through authorised representatives, Regulation 4E and exclusion of possessed units from liquidation estate – Held: Protection of homebuyers must operate strictly within the IBC framework and cannot dilute statutory trigger of insolvency [Paras 10–10.5, 13.21].

Proceedings under Section 7 – Nature – In Personam at Pre-admission Stage – Supreme Court reiterated that proceedings under Section 7 remain in personam until admission – Only financial creditor and corporate debtor have right of audience at pre-admission stage – Other creditors or third parties have no independent right to intervene [Paras 13.5, 13.11].

Intervention – Locus Standi – Housing Society – Co-operative housing society sought intervention claiming to represent homebuyers – Society neither financial creditor nor operational creditor – No privity of contract or statutory recognition as authorised representative – Held: Society lacks locus standi to intervene at Section 7 stage or in appeal against admission [Paras 13.1–13.5, 13.7–13.13].

Homebuyers as Financial Creditors – Mode of Participation – Individual allottees recognised as financial creditors under Section 5(8)(f) – Participation statutorily channelised through authorised representatives under Section 21(6A) read with Regulation 16A – Collective representation outside statutory framework impermissible [Paras 13.12–13.14].

Rule 11 NCLAT Rules – Inherent Powers – Limits – Inherent powers cannot override statutory scheme of IBC or create substantive participatory rights – Held: Rule 11 cannot be invoked to permit intervention where statute consciously excludes such participation [Paras 13.15–13.16].

Natural Justice – Audi Alteram Partem – No Vested Right – Denial of hearing to non-stakeholder does not violate natural justice absent legally vested right – Held: No prejudice shown as homebuyers’ interests are adequately safeguarded post-admission under IBC [Paras 13.19–13.21].

Directions to CoC – Transparency and Accountability – Supreme Court issued prospective directions requiring disclosure of complete allottee details in Information Memorandum – Mandatory recording of reasons where CoC declines handover of possession under Regulation 4E or recommends liquidation – Objective: transparency, accountability and protection of homebuyers [Para 15.1].

Decision: Civil Appeals dismissed – Judgment of NCLAT admitting Corporate Debtor into CIRP upheld – Rejection of intervention application by housing society affirmed – Interim stay vacated – Directions issued to Committee of Creditors regarding transparency and reasoned decision-making – No order as to costs.

Criminal Procedure – Bail Jurisprudence – Continuing Mandamus – Nationwide Compliance Monitoring – Supreme Court examined compliance with its earlier directions issued in Satender Kumar Antil vs. CBI and subsequent orders dated 06.08.2024, 21.01.2025 and 15.10.2025 – Despite filing of addendum to compliance report by Amicus Curiae, several States, Union Territories, High Courts, Union of India and CBI failed to file compliance affidavits – Court exercised continuing supervisory jurisdiction and issued exhaustive State-wise, UT-wise and institution-wise directions – Last and final opportunity granted for compliance [Paras 1–3].

Arrest Guidelines – Sections 41 & 41-A CrPC / Section 35 BNSS – Accountability of Investigating Officers – Court reiterated mandatory nature of compliance with arrest safeguards and notice of appearance – Directed States including Maharashtra, Haryana and Uttar Pradesh to provide details of non-compliance and action taken against erring officers – Emphasised obligation of authorities to adhere to binding precedent under Article 141 of the Constitution [Paras relating to States of Haryana, Maharashtra, Uttar Pradesh].

Undertrial Prisoners – SOP for Poor Prisoners – Bail Granted but Not Released – Directions issued to several States and High Courts to prepare and furnish data of undertrial prisoners granted bail but not released due to inability to furnish surety – Directed strict and time-bound implementation of SOP framed for poor prisoners – Judicial Officers directed to modify bail conditions where necessary to secure release [Paras concerning States and High Courts including Chhattisgarh, Andhra Pradesh, Bombay High Court].

High Courts – Supervisory Role – Implementation of Supreme Court Directions – Multiple High Courts directed to ensure full compliance of Direction (d) issued on 21.01.2025 – Directions included filing of data, minutes of monitoring committee meetings, use of Model Affidavit format and effective oversight at all judicial levels – Partial compliance by Bombay High Court noted and corrected [Paras under High Courts section].

Union of India & CBI – Institutional Responsibility – Special Courts and Compliance Mechanism – Union of India directed to assess requirement of additional CBI Special Courts in high pendency districts and to re-circulate MHA communications regarding fund transfer procedures – CBI directed to clarify disciplinary action contemplated against officers for non-compliance with binding directions of Supreme Court [Paras 37–38].

Interpretation of BNSS, 2023 – Section 35(1)(b) – Court heard Amicus Curiae and ASG on interpretation of Section 35(1)(b) BNSS – Issue kept open – Detailed reasoned order directed to follow [Penultimate Para].

Decision / Directions: Last and final opportunity granted to all defaulting States, Union Territories, High Courts, Union of India and CBI to comply with directions within three weeks – Compliance affidavits to be filed within one week thereafter after serving Amicus Curiae – Matters directed to be listed on 17/03/2026 at 2:00 p.m. – Detailed order on interpretation of BNSS to follow

Taxation Law - International Taxation – Double Taxation Avoidance Agreement (DTAA) – India-Mauritius DTAA – Capital Gains – Indirect Transfers – Tax Avoidance – GAAR – TRC Conclusiveness – The Supreme Court held that capital gains arising from the transfer of unlisted equity shares, which were part of an impermissible arrangement under law, are not entitled to exemption under Article 13(4) of the India-Mauritius DTAA – The Revenue successfully demonstrated that the transactions constituted impermissible tax-avoidance arrangements, lacking commercial substance and not qualifying as lawful – Consequently, Chapter X-A (GAAR) of the Income Tax Act, 1961, is applicable – The AAR's rejection of the applications for advance ruling on the ground of prima facie tax avoidance, as per proviso (iii) to Section 245R(2) of the Act, was upheld – The Court found that capital gains from transfers effected after the cut-off date of April 1, 2017, are taxable in India under the Income Tax Act read with the DTAA – The High Court's judgment setting aside the AAR's order was reversed – The Court emphasized that post-amendment, a TRC alone is not sufficient to avail DTAA benefits, and the tax authorities are empowered to investigate the real residence and management of entities to prevent treaty abuse – The transaction involved the sale of shares of a Singapore company deriving substantial value from Indian assets, by Mauritius-based entities controlled by an American company, which the AAR deemed a preordained arrangement for tax avoidance – The Court reiterated that while tax planning is permissible, it must conform to legal parameters and not be a sham or impermissible avoidance – The burden of proof to rebut the presumption of tax avoidance lies with the taxpayer [Paras 11, 18, 19, 28, 29, 33, 36, 37, 41, 46, 49, 50].

Income Tax Act, 1961 – Section 245R(2) – Authority for Advance Rulings (AAR) – Jurisdiction – Prima Facie Tax Avoidance – The Supreme Court clarified that the AAR is empowered to reject applications for advance rulings at the threshold if the transaction appears prima facie designed for tax avoidance – The term "prima facie" in Section 245R(2) implies that an initial examination of documents, satisfying the AAR that the transaction is for tax avoidance, is sufficient to reject the application – The burden of proof lies with the applicant to demonstrate otherwise – The High Court erred in adjudicating the issue on merits when the AAR had only made a prima facie finding of tax avoidance [Paras 11, 32, 33, 34].

Income Tax Act, 1961 – Section 9(1)(i) – Indirect Transfers – Source-Based Taxation – Explanations 4 & 5 – The Supreme Court affirmed that the retrospective amendments to Section 9(1)(i) of the Income Tax Act, 1961, through Explanations 4 and 5 (introduced by the Finance Act, 2012), codify the "look-through" principle – These amendments clarify that gains from the transfer of shares or interests in a foreign entity deriving substantial value from assets located in India are taxable in India, thereby establishing India as the source State for such income – This expanded scope of Section 9 ensures source-based taxation, irrespective of the entity's residence, where the economic nexus of income exists in India [Paras 7.4, 12.13, 12.14, 12.15, 28].

Income Tax Act, 1961 – Chapter XA – General Anti-Avoidance Rule (GAAR) – Applicability – Grandfathering Provisions – Rule 10U – The Supreme Court held that GAAR provisions under Chapter XA of the Income Tax Act, 1961, are applicable to the assessment year under consideration (AY 2019-20) – The Court clarified that while Rule 10U(1)(d) provides for grandfathering of investments made before April 1, 2017, Rule 10U(2) dilutes this by stating that GAAR applies to "any arrangement" irrespective of its entry date, if a tax benefit is obtained from such arrangement on or after April 1, 2017 – This means that even pre-2017 investments are subject to GAAR scrutiny if they form part of an impermissible avoidance arrangement yielding a tax benefit exceeding Rs. 3 crores after the cut-off date – The Court rejected the argument that all pre-2017 investments are immune from GAAR, emphasizing that GAAR targets abusive arrangements, not genuine investments [Paras 7.16, 7.17, 7.18, 7.19, 7.20, 7.21, 12.16, 12.17, 12.18, 12.28, 12.29, 12.30, 12.35, 46, 47].

Income Tax Act, 1961 – Section 90(4) & 90(5) – Tax Residency Certificate (TRC) – Evidentiary Value – Treaty Benefits – The Supreme Court ruled that post-amendment, a TRC issued by Mauritian authorities is an "eligibility condition" but not "sufficient evidence" for claiming DTAA benefits – The amendments to Section 90(4) and the insertion of Section 90(5) (Finance Act, 2012 and 2013) empower Indian tax authorities to seek additional documents and information, and to investigate the actual residence and management of entities – This position supersedes earlier CBDT Circulars (No. 789 and 682) that treated TRCs as conclusive proof of residence and beneficial ownership – The Court emphasized that the TRC is not binding on statutory authorities or courts without independent verification, especially in cases of fraudulent or fictitious transactions [Paras 7.5, 7.8, 7.10, 7.13, 7.25, 7.26, 7.27, 8.3, 8.4, 8.10, 8.17, 8.19, 8.21, 12.20, 12.21, 12.22, 12.23, 12.26, 36, 37, 44].

International Taxation – Treaty Interpretation – Substance Over Form – Judicial Anti-Avoidance Rules (JAAR) – The Supreme Court reiterated the principle of "substance over form" and the applicability of Judicial Anti-Avoidance Rules (JAAR) in Indian tax jurisprudence – It held that even if GAAR is inapplicable, JAAR can be invoked to deny treaty benefits in cases of treaty abuse or conduit structures lacking genuine commercial substance – The Court emphasized that the Revenue has the burden to establish abuse, but once established, the real transaction can be subjected to tax, disregarding interposed devices – The "look at" test, as enunciated in Ramsay and Vodafone, requires examining the entire transaction holistically to ascertain its true legal nature and dominant purpose, rather than adopting a dissecting approach [Paras 6.8, 6.15, 6.18, 7.5, 7.6, 7.8, 7.13, 7.24, 7.25, 8.6, 8.11, 8.12, 13.1, 60, 61, 63, 64, 65, 68, 69, 70, 71, 72, 73, 74, 75, 76, 77, 79, 80, 81, 82, 96, 97, 98, 99, 100, 101, 102, 103, 130, 131].

DTAA Amendment – Protocol of 2016 – Article 13(3A), 13(3B), 13(4), 27A – Grandfathering – The Supreme Court noted that the 2016 Protocol to the India-Mauritius DTAA introduced Articles 13(3A) and 13(3B), vesting source-based taxation rights for capital gains from shares acquired on or after April 1, 2017 – Existing investments made before this date were grandfathered – However, Article 13(4), a residuary provision, continues to allocate taxing rights to the residence State for properties not covered by other paragraphs – The LOB clause (Article 27A) was introduced to deny benefits to shell/conduit companies, defining them based on negligible business operations or low expenditure – The Court clarified that the grandfathering under the DTAA applies to direct transfers of shares of an Indian company, but indirect transfers of shares of a foreign company deriving value from Indian assets, especially if part of a tax avoidance arrangement, are not automatically exempt [Paras 6.6, 6.7, 6.9, 6.18, 7.14, 7.15, 8.7, 8.15, 8.16, 12.31, 12.32, 12.33, 12.34, 41, 45].

Tax Sovereignty – International Treaties – Policy Considerations – Justice J.B. Pardiwala, in a concurring opinion, emphasized the paramount importance of a nation's tax sovereignty in the global economic landscape – He highlighted that while international treaties are crucial for economic growth and cooperation, they should not compromise a nation's inherent right to tax income arising within its territory – The exercise of tax sovereignty requires a balance between domestic priorities and international obligations, with a focus on preventing tax evasion, money laundering, and other illicit financial activities – Treaties should include safeguards like Limitation of Benefits (LOB) clauses, GAAR override provisions, source-based taxation rights, tax credit methods (over exemptions), and exit/renegotiation clauses to protect national interests and adapt to evolving global trade dynamics – The Court stressed that India must assert its right to tax profits generated from its soil and avoid self-defeating compromises of its sovereignty [Paras 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 135, 136, 137, 138, 139, 140, 141, 142, 143, 144, 145, 146, 147, 148, 149, 150, 151].

Decision: Appeal allowed – Impugned judgment of the High Court set aside – Paras [51].