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Teva Pharmaceuticals USA Inc. vs. Deputy Commissioner of Income Tax, Circle 3(1)(1) & Anr. and connected matters

Writ Petition (Civil) · 2026:DHC:7843-DBDecided 15 Sept 2026New Delhi Bench
W.P.(C) 1295/2023, W.P.(C) 4065/2022, W.P.(C) 10711/2017, W.P.(C) 10714/2017, W.P.(C) 12721/2019CNR: DLHC010029222023
Justice Dinesh Mehta · Justice Vinod Kumar

Background

This case is part of a larger dispute arising from a US patent settlement between Ranbaxy and Teva over the generic drug Atorvastatin (Lipitor), under which Ranbaxy India paid roughly Rs. 1,851 crore to Teva Israel (Teva USA's parent) in 2012-2014. The Income Tax Department believed the money really belonged to Teva USA and, alleging the payment structure was designed to dodge tax in India, the US and Israel, issued a reassessment notice for Assessment Year 2014-15 to Teva USA under Section 148, using an extended 10-year limitation period on the theory that Teva Israel's bank deposit was an "asset" of Teva USA.

Decision Breakdown

The Court held that a bank deposit sitting in a different company's (Teva Israel's) account cannot be treated as an "asset" of Teva USA to justify the extended reassessment period, and that this theory was in any case sprung on the taxpayer only after its reply, without a fair chance to respond. Even applying the ordinary three-year limitation, the notice and preceding order were issued well beyond the time actually available to the tax department after accounting for the Supreme Court's Ashish Agarwal ruling and pandemic-related extensions. The notice and consequential order were quashed as both time-barred and issued without jurisdiction.

Lesson Learnt

Tax authorities cannot borrow limitation-extending provisions meant for cases where a taxpayer's "own asset" was found, by simply relabelling money in someone else's bank account as belonging to a different taxpayer, nor can they ambush a taxpayer with a brand-new legal theory only after its explanation has already been filed.

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