What did the Supreme Court decide about Article 245?

Parliament can make extraterritorial laws only when there is a real, not illusory, nexus with India or the welfare of Indians.

Does every foreign element allow Parliament to legislate?

No. If the matter has no genuine link to India, such law-making is beyond Article 245(1) and would be ultra vires.

What practical test should students remember?

Ask: Is there a concrete Indian impact or benefit to Indians? If yes, Parliament may legislate; if no, it cannot under Article 245.

What happened to GVK’s appeal?

The Supreme Court dismissed the appeal with no costs but clarified the nexus rule for extraterritorial law-making.

Is 'nexus with India' the same as mere connection?

It must be substantial and real. A thin or remote link is not enough under Article 245.

Law Easy

02 November, 2025

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GVK Industries v. Income Tax Officer (2011) 4 SCC 36 — Article 245 & Extraterritorial Nexus | The Law Easy

GVK Industries v. Income Tax Officer

Supreme Court of India 2011 Supreme Court Bench (2011) 4 SCC 36 Constitutional & Tax ~7 min read

Author: Gulzar Hashmi India Published: 02 Nov 2025

Article 245 Extraterritorial India Nexus

Quick Summary

This case defines the limit of Parliament’s power to make laws for events outside India. The Supreme Court says: Parliament may legislate for extraterritorial matters only when there is a real nexus with India or the welfare of Indians. A thin or remote link is not enough.

Citation: (2011) 4 SCC 36
Court: Supreme Court of India

Core Article: Article 245(1)
Holding: Nexus-with-India rule for extraterritorial laws

Issues

Can Parliament make laws for extraterritorial aspects under Article 245(1)?
What is the required nexus with India for such laws to be valid?

Rules

Article 245(1) does not allow laws about wholly foreign matters with no Indian nexus.
Parliament may legislate on extraterritorial matters when there is a real, direct, and not illusory impact on India or on the welfare of Indians.

Facts (Timeline)

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Project: GVK planned a gas-based power project in Andhra Pradesh and engaged ABB (Zurich) for finance-related professional services and facilitation of loans.

Payment & Tax: After services, ABB invoiced GVK. Since ABB had no business in India, GVK sought a No Objection Certificate from the Income Tax Officer regarding tax deduction.

Revenue Response: The ITO declined. The Commissioner first allowed relief but reversed after six months, demanding payment.

Litigation Path: GVK’s plea before the High Court failed. It then approached the Supreme Court.

Timeline visual for key facts in GVK Industries case

Arguments

Appellant (GVK)

ABB acted outside India; payments to a non-resident for offshore services should not trigger Indian tax without a strong nexus.
Extraterritorial laws must have a real link to India; a distant or indirect effect is not enough.

Respondent (Revenue)

The services enabled an Indian project; there is an Indian impact. Parliament can cover such payments if the link is genuine.
Tax responsibility arises when foreign elements materially affect India or Indian interests.

Judgment

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The Supreme Court dismissed the appeal (no costs). It laid down the principle that Article 245(1) permits extraterritorial legislation only when there is a real and substantive nexus with India or with the welfare of Indians. Laws about foreign matters with no nexus are ultra vires.

Ratio (Legal Principle)

Nexus Rule: Parliament’s power to legislate beyond India’s borders is valid when the subject has a direct, real, and not illusory impact on India or on Indians’ welfare. Otherwise, it falls outside Article 245(1).

Why It Matters

Sets a constitutional limit on extraterritorial law-making.
Helps decide taxability of cross-border payments and services.
Guides future cases on global operations with Indian effects.

Key Takeaways

Article 245(1) needs a real Indian nexus for extraterritorial laws.
Illusory or remote links do not justify legislation.
Focus is on impact on India or welfare of Indians.
Useful for tax, corporate, and regulatory cross-border questions.

Mnemonic + 3-Step Hook

Mnemonic: “LAW OUT? LINK IN!”

LAW OUT: Law aims outside India,
LINK IN: Must show a real link to India,
OR OUT: Otherwise it’s out—ultra vires.

3-Step Hook

Spot extraterritorial reach.
Test for a real Indian nexus.
If yes → valid; if no → ultra vires.

IRAC Outline

Issue	Rule	Application	Conclusion
Can Parliament legislate for foreign matters linked to an Indian project?	Article 245(1): extraterritorial laws valid only with a real India nexus or welfare of Indians.	ABB’s services affected an Indian power project; the impact must be assessed for genuine connection, not a remote one.	Principle affirmed; nexus required. Appeal dismissed without costs.

Glossary

Extraterritorial Legislation: Laws that apply to acts, persons, or events outside India.
Nexus with India: A concrete, substantial link to India’s territory or citizens’ welfare.
Ultra Vires: Beyond legal power; invalid for want of authority.

FAQs

Parliament needs a real Indian nexus to legislate for foreign aspects. Without it, the law is unconstitutional under Article 245.

No. The benefit or impact must be real and direct. A speculative or thin connection is not enough.

It guides when foreign services or payments can be taxed by India—only if there’s a strong India nexus.

No. The appeal was dismissed with no costs, but the Court clarified the constitutional rule on nexus.

Publication & SEO Block

CASE_TITLE: GVK Industries v. Income Tax Officer
PRIMARY_KEYWORDS: Article 245; extraterritorial legislation; nexus with India
SECONDARY_KEYWORDS: constitutional law; cross-border taxation; ABB Zurich; Indian project nexus

PUBLISH_DATE: 02 Nov 2025
AUTHOR_NAME: Gulzar Hashmi
LOCATION: India
Slug: gvk-industries-v-income-tax-officer

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