Section 265 of the Income-tax Act, 1961: Tax Payable Despite Reference or Appeal
Section 265 establishes that the assessed tax remains payable even when a reference is before a higher court or an appeal has been filed before the Supreme Court. A pending legal challenge does not, by itself, suspend payment.
Text of Section 265 - Tax to be paid notwithstanding reference, etc.
Notwithstanding that a reference has been made to the High Court or the Supreme Court or an appeal has been preferred to the Supreme Court, tax shall be payable in accordance with the assessment made in the case.
Meaning and scope of Section 265
The expression "notwithstanding" makes clear that the filing or pendency of the specified court proceedings does not automatically displace the tax demand arising from an assessment. The provision addresses payment during litigation; it does not itself decide whether the assessment is legally correct.
What is an assessment?
An assessment is the statutory determination of taxable income and the related tax liability by the income-tax authorities under the applicable provisions of the Act. The amount payable is governed by the operative assessment and demand, subject to subsequent lawful modification or relief.
What is a reference or appeal?
A reference is a statutory procedure by which a question of law is placed before a court under the relevant provisions, including the former reference procedure. An appeal seeks review of an order or judgment before the competent appellate forum. Section 265 expressly addresses references to the High Court or Supreme Court and appeals to the Supreme Court.
Does filing an appeal automatically stay tax recovery?
No. Section 265 does not grant an automatic stay merely because a reference or Supreme Court appeal is pending. However, a taxpayer may seek a stay or other recovery protection under the applicable statutory provisions or from the competent court. Any actual stay depends on the terms of the order granted.
For example, Section 220(6) of the Income-tax Act, 1961 permits the Assessing Officer, subject to discretion and conditions, to treat an assessee as not being in default in respect of disputed tax while an appeal under Section 246 or Section 246A is pending. This is distinct from the specific rule in Section 265.
Practical implications for taxpayers
- Check the assessment order, demand notice and the current amount outstanding.
- Observe the payment due date and any applicable recovery notices; filing litigation alone does not extend those deadlines.
- Where justified, apply promptly for a stay of demand or other appropriate relief before the competent authority or court.
- Comply with conditions of any stay order and preserve evidence of payments and correspondence.
- If the assessment is subsequently modified, seek consequential demand adjustment or refund as permitted by law.
Related legal provisions
- Section 261 - Appeal to the Supreme Court.
- Section 262 - Hearing before the Supreme Court.
- Section 267 - Amendment of assessment on appeal.
- Section 220 - When tax is payable and circumstances relating to default, including subsection (6).
- Section 246A - Appealable orders before the Commissioner (Appeals).
Income-tax Act, 2025 and transitional application
The Income-tax Act, 2025 came into force on 1 April 2026. For proceedings and tax periods governed by the earlier legislation, the relevant savings and transitional provisions must be considered. The applicable statutory rule should be checked against the assessment year and proceeding concerned; do not assume that section numbering in the 1961 Act carries over unchanged.
Official legal resources
Frequently asked questions
Is the assessed tax payable while a Supreme Court appeal is pending?
Generally, yes. Section 265 says that the tax remains payable in accordance with the assessment notwithstanding the specified pending proceedings, unless applicable relief or a stay alters recovery obligations.
Can the taxpayer request a stay of recovery?
Yes, where the relevant legal framework permits. A stay must be sought from the appropriate authority or court and is not automatic.
Does Section 265 determine the final tax liability?
No. It concerns payment pending litigation. The ultimate liability may change following the final appellate or judicial decision.
Updated: 27 October 2026. This article provides general legal information and is not a substitute for advice on individual proceedings.