Supreme Court Grants IT Dept. Liberty To File HC Appeal In Google Ireland ₹116 Crore Tax Dispute

The Supreme Court on Thursday declined to entertain the Income Tax Department's challenge to a Karnataka High Court judgment dated June 3, 2025, which had quashed assessment orders passed against Google Ireland for AYs 2009-10 and 2010-11.

The Court held that the Revenue must first pursue the available intra-court appeal before the High Court.

A Bench of Justices Aravind Kumar and Prasanna B. Varale dismissed the Revenue's Special Leave Petition, holding that an intra-court appeal against the Single Judge's order was available under Section 4 of the Karnataka High Court Act. The Bench granted liberty to the Revenue to pursue that remedy.

“Having heard learned Senior Counsel appearing for the petitioner – Revenue, we notice that the impugned order is passed by the learned Single Judge against which an intra court appeal is permitted under Section 4 of the Karnataka High Court Act, 1961. In that view of the matter, reserving liberty to the petitioner to file an appeal, if so advised, we dismiss the present Special Leave Petition.”

Without expressing any opinion on the merits of the case, the Court said that if such an appeal is filed within six weeks, the Karnataka High Court shall examine it on its own merits and in accordance with law.

“We make it clear that in the event of appeal being filed within six weeks from today, the jurisdictional High Court shall examine the said appeal on its own merits and in accordance with law. We make it clear that we have not expressed any opinion on the merits of the case.”

The dispute arose from assessment proceedings initiated against Google Ireland for Assessment Years 2009-10 and 2010-11. By orders dated December 24, 2018, the tax department assessed the company's income at about ₹241.77 crore and ₹268.40 crore respectively. It also raised tax demands exceeding ₹56.66 crore and ₹59.50 crore. Penalty proceedings were initiated as well.

Google Ireland challenged the orders before the Karnataka High Court through separate writ petitions. The company argued that the Revenue had passed final assessment orders and later attempted to treat them as draft assessment orders.

Accepting Google's contention and relying on its earlier Division Bench ruling in Commissioner of Income-tax (International Taxation) v. Cisco Systems Services B.V., the High Court held that the assessment orders could not be treated as draft assessment orders.

The Court noted that the orders were accompanied by demand notices and initiation of penalty proceedings. This indicated that they were final assessment orders in substance.

The High Court accordingly quashed the assessment orders passed against Google Ireland.