Supreme Court Issues Notice On IT Dept. Appeal Over Relief To Vedanta For TDS Default On Non-Resident Payments

The Supreme Court on Monday issued notice on an appeal filed by the Income Tax Department against a Madras High Court ruling that had partly quashed tax proceedings against Vedanta Ltd. The case concerns its alleged failure to deduct tax on payments made to its overseas group entity.

The Madras High Court had, on August 29, 2025 partly ruled in Vedanta's favour. It held that the tax department could not uniformly apply a seven-year limitation benchmark across all assessment years.

Observing this, the court said that “seven years cannot be the reasonable for all the subject assessment years” and that a “'One-size-fits-all' approach ill-fits the facts on hand."

A Bench of Justices K.V. Viswanathan and Vijay Bishnoi condoned the department's 151-day delay in filing the special leave petition. It then issued notice and tagged the matter with similar pending cases.

“Delay condoned. Issue notice. Tag with SLP (C) 10077 of 2026,” the Court said.

The dispute arose after Vedanta made payments between 2009-10 and 2014-15 to Vedanta Resources Public Limited Company, a non-resident entity, under consultancy and representative office agreements.

No tax was deducted at source on these payments. Treating Vedanta as an assessee in default, the Income Tax Department issued show cause notices and raised demands for assessment years 2010-11 to 2015-16.

Vedanta challenged the proceedings before a single judge of the Madras High Court. On February 24, 2023, the judge held that such proceedings could be initiated within a reasonable period and treated seven years as the applicable benchmark.

Vedanta then filed writ appeals. It argued that the proceedings were time-barred and that several courts had treated four years as the reasonable period in such cases.

The Division Bench partly allowed Vedanta's appeals. It held that while no rigid limitation period could be prescribed, the department could not uniformly apply seven years across all assessment years.

Taking six years as the appropriate benchmark, the High Court set aside proceedings for assessment years 2010-11 and 2012-13 to 2015-16. It sustained the proceedings for the assessment year 2011-12.