The department has invoked GAAR on a demerger that the NCLT sanctioned after notice to the income-tax authorities, and s.72A(4) expressly allowed the loss to move with the undertaking. I have no right of appeal against the reference or the directions. What can I actually do?
You go to the High Court under Article 226, and the Bombay High Court has said in terms that the absence of an appeal is itself a reason to entertain the writ. On 19 December 2025 it issued Rule on a petition challenging a s.144BA reference dated 31 March 2025 and directions dated 30 October 2025 invoking Chapter X-A on an NCLT-sanctioned demerger, recording that it was "mindful of the fact that there is no provisions for an Appeal for impugning the reference ... or the directions ... invoking the provisions of Chapter X-A of the IT Act". It found a strong prima facie case and granted interim relief staying the reference, the directions and the assessment proceedings for AYs 2022-23 and 2023-24. Two arguments carried that interim finding: that Chapter X-A could never have been invoked once a competent authority, the NCLT, had sanctioned the demerger after notice to the income-tax authorities who raised no objection; and that s.72A(4) expressly permits the transfer of accumulated loss and unabsorbed depreciation of the demerged undertaking, so that what the Act itself allows cannot be an impermissible avoidance arrangement.
Decided by the High Court (B. P. Colabawalla J and Amit S. Jamsandekar J) on 2025-12-19, reported as Writ Petition No. 4867 of 2025, High Court of Judicature at Bombay, Ordinary Original Civil Jurisdiction; no law-report citation traced. It bears on section 144BA, section 144BA(14), section 95, section 96, section 96(1)(b), section 97, section 72A(4), section 100 of the Income Tax Act 1961, in Assessment & Scrutiny, Appeals and How Tax Law Is Read matters.
This is, on what I could find, the first order in which a High Court has expressly tied the writ jurisdiction to the s.144BA(14) appeal bar and then stayed a Chapter X-A reference and the directions issued on it. Practitioners should take three things from it. First, the route: there is no appeal, so a challenge is by writ, and the absence of an alternative remedy is a positive ground for admission rather than a hurdle. Second, the substantive point that persuaded the Court at the interim stage — that Chapter X-A is aimed at avoidance and cannot be used against a transfer the Act itself sanctions in terms, here under s.72A(4) — is the s.96(1)(b) "misuse or abuse of the provisions of this Act" argument put the other way round, and it is the strongest form of the SAAR-versus-GAAR contention that failed on the facts before the Telangana High Court on 7 June 2024. Third, the NCLT point: where the income-tax authorities were given notice of the scheme and did not object, the taxpayer has an answer that goes to the bona fides of the arrangement under s.96(1)(d) as well as to the propriety of reopening the question later. All of this is INTERIM. The Court decided only that arguable questions arise and that a prima facie case for interim relief was made out; it has decided nothing on the merits, and the reader must not use this order as authority that GAAR cannot apply to a court-sanctioned demerger.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The Digital Communication Undertaking of a company called NXTDIGITAL was hived off to the petitioner under a scheme of demerger sanctioned by the National Company Law Tribunal. Before the demerger was sanctioned the income-tax authorities were given notice, and no objection was raised to it. The first respondent, the Principal Commissioner of Income Tax, Central-1, Mumbai, made a reference under s.144BA of the Act dated 31 March 2025, and the third respondent issued directions dated 30 October 2025 for assessment years 2022-23 and 2023-24 invoking Chapter X-A. The petitioner moved the Bombay High Court under Article 226 seeking a declaration that the invocation of Chapter X-A was ultra vires and contrary to the statutory scheme of the Act, a declaration that the reference and the directions were illegal and wholly without jurisdiction, and the quashing of both, together with interim relief staying their operation and the assessment proceedings for those two years. The petitioner's case, as recorded by the Court, was that Chapter X-A could never have been invoked once there was a binding demerger order passed by a competent authority, and that it could never have been invoked in the face of s.72A(4), which categorically allows the transfer of accumulated loss and unabsorbed depreciation of the demerged undertaking, so that where the Act itself permits such a transfer the anti-avoidance Chapter has been wrongly invoked.
Rule issued, and interim relief granted in terms of the prayer staying the operation and implementation of the impugned reference dated 31 March 2025, the impugned directions dated 30 October 2025, and the impugned assessment proceedings for assessment years 2022-23 and 2023-24 (paragraphs 3 to 6). The Court held that the petition raises arguable questions that require further consideration, that it was mindful that no appeal lies against a Chapter X-A reference or the directions issued on it, and that a strong prima facie case for interim relief was made out. Nothing was decided on the merits; the matter was expedited and fixed for directions on 19 January 2026 (paragraph 7).
The Court gave two reasons for issuing Rule and one composite reason for the interim relief. Rule was issued because the petition raises arguable questions requiring further consideration and because there is no provision for an appeal against the reference made by the first respondent or the directions issued by the third respondent invoking Chapter X-A (paragraph 3). On interim relief, the Court recorded the demerger of the Digital Communication Undertaking of NXTDIGITAL to the petitioner under an NCLT-sanctioned scheme, that the income-tax authorities had been given notice before the sanction and had raised no objection, and the petitioner's contention that Chapter X-A could never have been invoked once there was a binding demerger order passed by the competent authority (paragraph 4); and it recorded the further contention that Chapter X-A could never have been invoked given s.72A(4), which categorically allows the transfer of accumulated loss and unabsorbed depreciation of the demerged undertaking, so that once the Act itself permits such a transfer the provisions of Chapter X-A, which are "basically for Anti Avoidance of Tax", have been wrongly invoked (paragraph 5). On those circumstances it found a strong prima facie case (paragraph 6).
We are also mindful of the fact that there is no provisions for an Appeal for impugning the reference made by Respondent No.1 or the directions issued by Respondent No.3 invoking the provisions of Chapter X-A of the IT Act. Hence, we issue Rule.
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Handle my notice → Ask a CA on WhatsAppYou go to the High Court under Article 226, and the Bombay High Court has said in terms that the absence of an appeal is itself a reason to entertain the writ. On 19 December 2025 it issued Rule on a petition challenging a s.144BA reference dated 31 March 2025 and directions dated 30 October 2025 invoking Chapter X-A on an NCLT-sanctioned demerger, recording that it was "mindful of the fact that there is no provisions for an Appeal for impugning the reference ... or the directions ... invoking the provisions of Chapter X-A of the IT Act". It found a strong prima facie case and granted interim relief staying the reference, the directions and the assessment proceedings for AYs 2022-23 and 2023-24. Two arguments carried that interim finding: that Chapter X-A could never have been invoked once a competent authority, the NCLT, had sanctioned the demerger after notice to the income-tax authorities who raised no objection; and that s.72A(4) expressly permits the transfer of accumulated loss and unabsorbed depreciation of the demerged undertaking, so that what the Act itself allows cannot be an impermissible avoidance arrangement. This was decided by the High Court (B. P. Colabawalla J and Amit S. Jamsandekar J) and bears on section 144BA, section 144BA(14), section 95, section 96, section 96(1)(b), section 97, section 72A(4), section 100 of the Income Tax Act 1961. It is reported as Writ Petition No. 4867 of 2025, High Court of Judicature at Bombay, Ordinary Original Civil Jurisdiction; no law-report citation traced. This is, on what I could find, the first order in which a High Court has expressly tied the writ jurisdiction to the s.144BA(14) appeal bar and then stayed a Chapter X-A reference and the directions issued on it. Practitioners should take three things from it. First, the route: there is no appeal, so a challenge is by writ, and the absence of an alternative remedy is a positive ground for admission rather than a hurdle. Second, the substantive point that persuaded the Court at the interim stage — that Chapter X-A is aimed at avoidance and cannot be used against a transfer the Act itself sanctions in terms, here under s.72A(4) — is the s.96(1)(b) "misuse or abuse of the provisions of this Act" argument put the other way round, and it is the strongest form of the SAAR-versus-GAAR contention that failed on the facts before the Telangana High Court on 7 June 2024. Third, the NCLT point: where the income-tax authorities were given notice of the scheme and did not object, the taxpayer has an answer that goes to the bona fides of the arrangement under s.96(1)(d) as well as to the propriety of reopening the question later. All of this is INTERIM. The Court decided only that arguable questions arise and that a prima facie case for interim relief was made out; it has decided nothing on the merits, and the reader must not use this order as authority that GAAR cannot apply to a court-sanctioned demerger. If it applies to you, the first step is this: If a s.144BA reference or a direction has been made against you, do not look for an appeal. Section 144BA(14) bars it. Move under Article 226 and say so in the petition, as the ground on which the writ is maintainable.
The Digital Communication Undertaking of a company called NXTDIGITAL was hived off to the petitioner under a scheme of demerger sanctioned by the National Company Law Tribunal. Before the demerger was sanctioned the income-tax authorities were given notice, and no objection was raised to it. The first respondent, the Principal Commissioner of Income Tax, Central-1, Mumbai, made a reference under s.144BA of the Act dated 31 March 2025, and the third respondent issued directions dated 30 October 2025 for assessment years 2022-23 and 2023-24 invoking Chapter X-A. The petitioner moved the Bombay High Court under Article 226 seeking a declaration that the invocation of Chapter X-A was ultra vires and contrary to the statutory scheme of the Act, a declaration that the reference and the directions were illegal and wholly without jurisdiction, and the quashing of both, together with interim relief staying their operation and the assessment proceedings for those two years. The petitioner's case, as recorded by the Court, was that Chapter X-A could never have been invoked once there was a binding demerger order passed by a competent authority, and that it could never have been invoked in the face of s.72A(4), which categorically allows the transfer of accumulated loss and unabsorbed depreciation of the demerged undertaking, so that where the Act itself permits such a transfer the anti-avoidance Chapter has been wrongly invoked. The matter was decided on 2025-12-19 by the High Court (B. P. Colabawalla J and Amit S. Jamsandekar J). On those facts the High Court held as follows. Rule issued, and interim relief granted in terms of the prayer staying the operation and implementation of the impugned reference dated 31 March 2025, the impugned directions dated 30 October 2025, and the impugned assessment proceedings for assessment years 2022-23 and 2023-24 (paragraphs 3 to 6). The Court held that the petition raises arguable questions that require further consideration, that it was mindful that no appeal lies against a Chapter X-A reference or the directions issued on it, and that a strong prima facie case for interim relief was made out. Nothing was decided on the merits; the matter was expedited and fixed for directions on 19 January 2026 (paragraph 7).
The Court gave two reasons for issuing Rule and one composite reason for the interim relief. Rule was issued because the petition raises arguable questions requiring further consideration and because there is no provision for an appeal against the reference made by the first respondent or the directions issued by the third respondent invoking Chapter X-A (paragraph 3). On interim relief, the Court recorded the demerger of the Digital Communication Undertaking of NXTDIGITAL to the petitioner under an NCLT-sanctioned scheme, that the income-tax authorities had been given notice before the sanction and had raised no objection, and the petitioner's contention that Chapter X-A could never have been invoked once there was a binding demerger order passed by the competent authority (paragraph 4); and it recorded the further contention that Chapter X-A could never have been invoked given s.72A(4), which categorically allows the transfer of accumulated loss and unabsorbed depreciation of the demerged undertaking, so that once the Act itself permits such a transfer the provisions of Chapter X-A, which are "basically for Anti Avoidance of Tax", have been wrongly invoked (paragraph 5). On those circumstances it found a strong prima facie case (paragraph 6). In the words reproduced by the source cited on this page: "We are also mindful of the fact that there is no provisions for an Appeal for impugning the reference made by Respondent No.1 or the directions issued by Respondent No.3 invoking the provisions of Chapter X-A of the IT Act. Hence, we issue Rule."
It was decided by the High Court on 2025-12-19 and is reported as Writ Petition No. 4867 of 2025, High Court of Judicature at Bombay, Ordinary Original Civil Jurisdiction; no law-report citation traced. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 144BA, section 144BA(14), section 95, section 96, section 96(1)(b), section 97, section 72A(4), section 100, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. Rule issued, and interim relief granted in terms of the prayer staying the operation and implementation of the impugned reference dated 31 March 2025, the impugned directions dated 30 October 2025, and the impugned assessment proceedings for assessment years 2022-23 and 2023-24 (paragraphs 3 to 6). The Court held that the petition raises arguable questions that require further consideration, that it was mindful that no appeal lies against a Chapter X-A reference or the directions issued on it, and that a strong prima facie case for interim relief was made out. Nothing was decided on the merits; the matter was expedited and fixed for directions on 19 January 2026 (paragraph 7). It arises in Assessment & Scrutiny, Appeals and How Tax Law Is Read matters, on section 144BA, section 144BA(14), section 95, section 96, section 96(1)(b), section 97, section 72A(4), section 100 of the Income Tax Act 1961, and was decided by B. P. Colabawalla J and Amit S. Jamsandekar J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Where the transaction was sanctioned by the NCLT, put on record the notice given to the income-tax authorities and their response or silence, and the sanction order itself. That is what carried the prima facie finding here. Identify the specific provision of the Act that permitted what you did — here s.72A(4) — and frame the answer to s.96(1)(b) around it: what the Act expressly allows cannot without more be a misuse or abuse of the Act. Ask for interim relief in terms that cover all three limbs — the reference, the directions and the consequent assessment proceedings — because a stay of the direction alone leaves the assessment free to be framed. Track the matter before relying on it. This is an order at the admission stage in a live petition, and the reasoning may not survive final hearing.
Validity check could not be completed. Validity check could not be completed, and the label does not carry what needs saying: this is an interim order in a petition that was still pending when it was made, in which Rule was issued and the matter fixed for directions on 19 January 2026. Nothing has been decided on the merits and the interim finding of a strong prima facie case may not survive final hearing. I found no later order in W.P. No. 4867 of 2025 and therefore do not know the present state of the proceeding, nor whether the interim relief still subsists. No check of any appeal against this order was made. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
This is an INTERIM order, not a judgment on the merits, and it should be cited as such. It runs to eight numbered paragraphs; I established that by having the first line of every numbered paragraph transcribed in sequence from paragraph 1 to the last, and the document ends at paragraph 8. The order does not identify Respondent No. 3, the authority that issued the directions dated 30 October 2025; the structure of s.144BA makes the Approving Panel the obvious candidate, but the order does not say so and I have not asserted it. Prayer clause (g), which the Court granted, is set out in the order as referring to "the Impugned Reference[u/s 144B] of the Act dated 31 March 2025" — the reference is to s.144BA, not s.144B, and paragraph 1 of the same order records that leave was granted to amend prayer clause (g) "by correcting a typographical mistake", which is presumably this. I could not find any later order in W.P. No. 4867 of 2025: the order records that the matter was expedited and "peremptorily fixed for directions on 19th January 2026", and a title search on indiankanoon for Hinduja Global Solutions returned fifty-five documents of which this was the only Chapter X-A matter, so what happened on 19 January 2026 is unknown to me. No law-report citation was traced. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Rule issued, and interim relief granted in terms of the prayer staying the operation and implementation of the impugned reference dated 31 March 2025, the impugned directions dated 30 October 2025, and the impugned assessment proceedings for assessment years 2022-23 and 2023-24 (paragraphs 3 to 6). The Court held that the petition raises arguable questions that require further consideration, that it was mindful that no appeal lies against a Chapter X-A reference or the directions issued on it, and that a strong prima facie case for interim relief was made out. Nothing was decided on the merits; the matter was expedited and fixed for directions on 19 January 2026 (paragraph 7).
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