Section 265 — Tax to be Paid Notwithstanding Reference, etc.
Case Laws & Commentary — Income-tax Act, 1961 (as amended by the Finance Act, 2026) — bharattax.co Treatise
Status: Live. Tax remains payable in accordance with the assessment notwithstanding that a reference has been made to the High Court or Supreme Court or an appeal preferred.
Finance Act, 2026: No amendment. The Finance Act, 2026 does not touch section 265.
Nature / mechanism: A no-automatic-stay rule: the pendency of a reference/appeal does not, of itself, suspend the obligation to pay the tax assessed.
Litigation profile: Little direct litigation — candour rule; the live question of stay is governed by the recovery provisions (sections 220(6), 254(2A)) and the stay jurisprudence.
A. COMMENTARY
Pendency of higher proceedings does not stay recovery
Section 265 enacts that tax is payable in conformity with the assessment despite a reference or appeal being pending — there is no automatic stay merely because the matter is before the High Court or Supreme Court. Relief from recovery, where warranted, must be sought through the discretionary stay powers — section 220(6) (AO/Commissioner treating the assessee as not in default during appeal), section 254(2A) (Tribunal's stay), or the High Court's writ jurisdiction — on the established three-fold test of prima facie case, balance of convenience and irreparable injury.
B. STATUTORY TEXT (verbatim)
Reproduced verbatim from the Income-tax Act, 1961 (as amended up to the Finance Act, 2025); the Finance Act, 2026 makes no change to this section. Inline numerals in square brackets are the bare Act's amendment-footnote markers.
Tax to be paid notwithstanding reference, etc.
265. 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.
C. AUTHORITIES
Candour rule on the section itself; the stay question is governed by the recovery/stay regime.
Cluster 1 — Stay is discretionary, not automatic (cognate)
DCIT v. Pepsi Foods Ltd., (2021) 433 ITR 295 (SC)
Relevance Confirms that stay of recovery pending appeal is a discretionary relief subject to statutory limits — consistent with section 265's rule that pendency does not, by itself, stay recovery.
CHAPTER XX — APPEALS AND REVISION | F.—General
Section 265 — Tax to be Paid Notwithstanding Reference, etc.
Case Laws & Commentary — Income-tax Act, 1961 (as amended by the Finance Act, 2026) — bharattax.co Treatise
Status: Live. Tax remains payable in accordance with the assessment notwithstanding that a reference has been made to the High Court or Supreme Court or an appeal preferred.
Finance Act, 2026: No amendment. The Finance Act, 2026 does not touch section 265.
Nature / mechanism: A no-automatic-stay rule: the pendency of a reference/appeal does not, of itself, suspend the obligation to pay the tax assessed.
Litigation profile: Little direct litigation — candour rule; the live question of stay is governed by the recovery provisions (sections 220(6), 254(2A)) and the stay jurisprudence.
A. COMMENTARY
Pendency of higher proceedings does not stay recovery
Section 265 enacts that tax is payable in conformity with the assessment despite a reference or appeal being pending — there is no automatic stay merely because the matter is before the High Court or Supreme Court. Relief from recovery, where warranted, must be sought through the discretionary stay powers — section 220(6) (AO/Commissioner treating the assessee as not in default during appeal), section 254(2A) (Tribunal's stay), or the High Court's writ jurisdiction — on the established three-fold test of prima facie case, balance of convenience and irreparable injury.
B. STATUTORY TEXT (verbatim)
Reproduced verbatim from the Income-tax Act, 1961 (as amended up to the Finance Act, 2025); the Finance Act, 2026 makes no change to this section. Inline numerals in square brackets are the bare Act's amendment-footnote markers.
Tax to be paid notwithstanding reference, etc.
265. 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.
C. AUTHORITIES
Candour rule on the section itself; the stay question is governed by the recovery/stay regime.
Cluster 1 — Stay is discretionary, not automatic (cognate)
DCIT v. Pepsi Foods Ltd., (2021) 433 ITR 295 (SC)
Relevance Confirms that stay of recovery pending appeal is a discretionary relief subject to statutory limits — consistent with section 265's rule that pendency does not, by itself, stay recovery.