In the Supreme Court of India judgment reported as 2025 INSC 1247 delivered on 17 October 2025, the Apex Court addressed appeals arising from Income Tax Appeal Nos. 49 of 2005, 91 & 98 of 2006 relating to assessment years 1996-97, 1997-98 and 1999-2000. The appellant, Pride Foramer S.A., a non-resident French corporation engaged in offshore drilling contracts, contested the High Court of Uttarakhand’s reversal of Income Tax Appellate Tribunal (ITAT) orders that allowed business expenditure deductions under Section 37 and carry forward of unabsorbed depreciation under Section 32(2) of the Income Tax Act, 1961.

The issue before the Supreme Court was whether the appellant could be said to have been carrying on business in India during the relevant period so as to claim the aforesaid deductions and unabsorbed depreciation. The Tribunal had found that a temporary lull in business activity is distinct from complete cessation, noting ongoing correspondence with ONGC and intent to secure contracts. The High Court erroneously held that absence of a permanent establishment and subsisting contract meant no business in India.

The Supreme Court affirmed that the Tribunal’s view correctly reflected commercial reality. Mere failure to procure a contract or operate from a domestic office does not equate to an end of business activity; ongoing negotiations and efforts to obtain contracts demonstrate genuine business operations. The Apex Court rejected the High Court’s narrow interpretation, reinstated the ITAT findings, and allowed the appeals, directing that assessment orders consistent with the ITAT’s conclusions be passed.

RELATED CASE LAW (to cite contextually in the blog):

  1. CIT v. Vikram Cotton Mills Ltd., (1988) 169 ITR 597 (SC) – Broad interpretation of “business” for tax deductions.

  2. Narain Swadeshi Weaving Mills v. CIT, 2 SCC 546 (1954) – Principles of business activity relevance in tax assessments.

    LINK TO DOWNLOAD THE ORDER
    https://mytaxexpert.co.in/uploads/1767666982_PRIDEFORAMERS.A.VSCOMMISSIONEROFINCOMETAX.pdf 

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