G.V.K Industries V. Income-tax Officer (2011)

Citation: (2011) 4 SCC 36

Date of Judgment: 01/03/2011

Case No: CIVIL APPEAL NO. 7796 OF 1997

Case Type: Civil Appeal

Appellant: GVK Industries Limited & Another

Respondent: The Income Tax Officer & Another


  • Hon’ble Justice S.H. Kapadia
  • Hon’ble Justice B. Sudershan Reddy
  • Hon’ble Justice K.S. Radhakrishnan
  • Hon’ble Justice Surinder Singh Nijjar
  • Hon’ble Justice Swatanter Kumar

Court: Supreme Court of India

Statutes Referred:

  • Constitution of India – Article 245
  • Income Tax Act, 1961

Cases Referred:

  • Electronics Corporation Of India Ltd vs Commissioner Of Income Tax & Anr (1989) (2) SCC 642- 646


  • GVK Company was incorporated in Andhra Pradesh to start a gas related power project.
  • In order to raise finance and get easy loan, the Company hired the Services of ABB – Projects & Trade Finance International Ltd. which was based in Zurich, Switzerland for expert consultancy in the matter.
  • Through email, ABB provided expert services from Zurich regarding how to complete the paperwork required for loan approval from both domestic and foreign financial institutions.
  • After fulfilment of the services, an invoice was sent by ABB Company to GVK Company for payment.
  • As ABB Company had no business in India, the GVK Company approached the Income Tax Officer after receiving the invoice to obtain a “No Objection Certificate,” in order to discharge the tax liability under the Income Tax Act, 1961.
  • It was submitted by GVK Company to Income Tax Officer that The Income Tax Act of 1961’s Section 9(1)(i) would not apply to ABB Company because it does not have a business connection in India, and since it has not provided any technical services, Section 9(1)(vii)(b) would also not apply.
  • The Application was rejected by Income Tax Officer.
  • The GVK Company then submitted the application to the Commissioner of Income Tax, who at first approved it but then withdrew their decision after six months and demanded payment of the tax under either Section 9(1)(i) or Section 9(1)(vii)(b) of Income Tax Act, 1961.
  • The GVK Company approached the High Court by way of writ petition and challenged the order of Commissioner of Income Tax.
  • The High Court held that Section 9(1)(i) will not be applicable in the matter but upheld the validity of Section 9(1)(vii)(b) in the matter and hence GVK Company was not entitled to “No Objection Certificate.”
  • Being aggrieved by the decision of High Court, the appeal was filed by GVK Company before the Supreme Court.

Issues Involved:

  • Whether it is Constitutionally prohibited for the Parliament to pass laws pertaining to extra-territorial issues or causes?
  • Whether the Parliament have power to legislate for any territory, other then the territory of India or any part of it?

Contentions of the Petitioner/Appellant:

The Counsel for the Petitioner contended that:

  • The laws made by one state may lack legislative power in another state.
  • That extra territorial laws might be detrimental to India.
  • That the legitimacy of state powers, even within Hobbesian logic, depends on the exclusive use of those powers for the welfare of the people.
  • That no organ of the Indian State can hold the collective powers of the people unless those powers are utilized solely for the welfare of India.

Contentions of the Respondent:

The Counsel for the Respondent contended that:

  • That to reconsider the decision given in ECIL case by three judge bench because the narrow reading of Article 245 has reduced the Parliament’s Law Making powers regarding extra-territorial aspects that have an impact on or nexus with India.
  • That Indian courts lacked the authority to rule that extraterritorial laws passed by parliament is invalid on the ground that they have an extra-territorial effect.
  • That it is very clear from the combined reading of both clauses of Article 245 that laws enacted by the Parliament within India’s borders may not be repealed just because they will be implemented outside of India.


It was held that Laws pertaining to extraterritorial territories may be passed by the Parliament, but only if they are directly related to Indian territory or the welfare of the Indian people. The court also ruled that as the Indian Parliament exists solely for the benefit of the Indian people and is tasked with serving their interests, it lacks the authority to pass legislation pertaining to extra-territorial area that have no nexus with Indian territory. Thus Article 245(1) does not extend to those extra-territorial aspects that do not have a nexus with India.

Ratio Decidendi:


Obiter Dicta:



In conclusion, the Supreme Court in this case marked a significant legal pronouncement by allowing the Parliament to make Extra territorial laws but only when such laws have nexus with Indian territory or welfare of people of India as the Parliament has the duty to work for the welfare of Country and it’s people. Further the Indian parliament passing laws that have no connection to India would constitute a breach of “territorial sovereignty,” which is safeguarded by international laws and treaties.

Drafted By:- Sargam Bansal

Published on: February 19, 2024 at 08:54 IST

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