November 2025

In S.G. Jaisinghani vs. Union of India, the Supreme Court decisively upheld the seniority and promotion rules for the Income-tax Service, Class I, Grade II, against constitutional challenges under Articles 14 and 16. The Court ruled that differentiating between direct recruits and promotees is permissible as they constitute distinct recruitment sources with legitimate experiential differences. The seniority rule, which grants promotees precedence over direct recruits from the same and three prior years, is justified to prioritize experienced officers for higher roles. The linked promotion rule, counting promotee’s Class II service, ensures the seniority framework’s efficacy. The quota rule was deemed non-justiciable as a mere policy directive. This judgment reinforces the principle that reasonable classifications in service rules, based on recruitment source and job requirements, do not violate constitutional guarantees of equality.

In a landmark ruling on TDS for cross-border payments, the Supreme Court upheld that Section 195 of the Income Tax Act 1961 mandates tax deduction at source on payments to non-residents even when the sum is not wholly income (e.g., includes cost of materials). The Court clarified that the obligation extends to ‘any sum chargeable,’ which encompasses trading receipts with embedded income. However, the deductible tax is only on the appropriate proportion chargeable as income, not the gross sum. This decision reinforces the revenue’s ability to secure tax collection from non-residents upfront, while providing mechanisms (like Section 195(2) applications) for precise determination of taxable components. It resolves long-standing ambiguity by aligning Section 195 with the broader scheme of TDS provisions.

In Vrindavan Goverdhan Lal Pittie vs. Union of India, the Supreme Court upheld the constitutional validity of the penalty provision under Section 18(1)(a) of the Wealth Tax Act 1957 for delayed filing of returns. The petitioner’s challenge, based on Articles 14 and 19(1)(f), was dismissed as the Court found the penalty of 1/2% of assessed net wealth per month was neither confiscatory nor discriminatory. The ruling clarifies that such fixed-percentage penalties linked to assessed wealth are constitutionally permissible, even if they result in higher absolute amounts for wealthier assessees, and treats the issue as largely academic due to subsequent legislative amendments.