Most taxpayers go through life never needing to understand what happens after the Supreme Court awards costs in a case involving tax matters. But for those who do — or for anyone curious about how deeply structured our legal system is — Section 266 is surprisingly important.
Section 266 deals with the execution of costs awarded by the Supreme Court. It lays down the method for how such awards should be carried out, ensuring a smooth & legally backed process.
It also works in harmony with related provisions such as the requirement to provide for payment of tax together with interest & fee, and even broader procedural powers like situations where the Settlement Commission may send a case back to the Assessing Officer.
What Is Section 266 of the Income Tax Act?
Section 266 states that:
- When the Supreme Court awards costs in a case related to income tax matters,
- The High Court may execute that order,
- And may transmit the order for execution to any of its subordinate courts.
In short, It provides the legal pathway for enforcing Supreme Court orders on costs, using the High Court as the channel.
This ensures the process is structured, clear, & follows the judicial hierarchy.
Also Read: When the Tax Department Hits the "Undo" Button
Why Does This Rule Exist?
At first glance, it might seem odd — why does the Income Tax Act include a provision about executing costs from Supreme Court orders?
But once you understand the system, the purpose becomes clear:
✔ Supreme Court does not execute its own cost orders
- The execution process usually happens through lower courts.
✔ High Courts act as the administrative bridge
- They are empowered to transmit the order wherever execution is appropriate.
✔ Tax cases often involve different jurisdictions
- A taxpayer may live in one state, conduct business in another, & have assets elsewhere.
✔ Section 266 ensures legal uniformity
- Regardless of where the parties are located, the execution for costs awarded by the Supreme Court follows a smooth, enforceable path.
In short, the section ensures that Supreme Court decisions aren’t just symbolic — they are carried out fully & effectively.
How Section 266 Works in Practice
A tax professional once shared this story with me:
A complex appeal went all the way to the Supreme Court. When the judgment came, the Court not only decided the tax dispute but also awarded costs to one party.
The question was: How do we actually recover this amount? Who enforces it?
This is where Section 266 stepped in.
Under this provision:
- The party entitled to costs files a petition before the High Court
- The High Court examines the petition
- It then transmits the order to the relevant subordinate court
- The subordinate court carries out the execution — like issuing recovery actions"
Without Section 266, this process could be confusing & inconsistent.
Also Read: When Can the Assessing Officer Reject Books of Accounts? Section 145(3) of Income Tax Act
How Section 266 Connects With Other Parts of the Law
While Section 266 specifically handles Supreme Court cost orders, it doesn’t work in isolation. It aligns with other procedural and administrative rules:
1. Payment of tax, interest, and fee
When the Act says a taxpayer must pay tax together with interest and fee, the enforcement of those dues — if disputed through appeals — can eventually connect with higher judicial orders.
2. Settlement Commission proceedings
In certain cases, when the Settlement Commission feels a matter requires deeper assessment, it allows the case to be sent back to the Assessing Officer.
If such an order is challenged up to the Supreme Court & costs are awarded, Section 266 helps execute the final step.
3. Income tax recovery mechanisms
Other sections deal with recovery of tax, interest, penalties, etc.
Section 266 is a parallel mechanism — but specifically for court-awarded costs, not tax dues.
Why Section 266 Matters
✔ It shows how structured & fair the tax system is
- Supreme Court orders don’t float in the air — the law provides a precise way to enforce them.
✔ It’s proof that the Income Tax Act covers more than just taxes
- It governs the entire legal process associated with tax administration.
✔ It protects parties who win cost awards
- Without such a provision, people might secure a legal victory but struggle to recover the awarded amount.
✔ It emphasises legal discipline
- Even the highest court’s cost orders follow orderly judicial channels.
Common Misunderstandings About Section 266
Myth 1: Section 266 deals with recovery of tax
Incorrect — it deals specifically with execution of costs awarded by the Supreme Court, not tax dues.
Myth 2: Only the Supreme Court executes its own orders
Supreme Court awards costs, but execution happens through the High Court.
Myth 3: It applies only in major corporate cases
It applies to any tax matter reaching the Supreme Court — big or small.
Also Read: Rules on Cash Transactions, Loans & Deposits
Key Takeaways
- Section 266 deals with the execution of costs awarded by the Supreme Court in income tax matters.
- The High Court can transmit the order for execution to any of its subordinate courts.
- It ensures execution for costs awarded by the Supreme Court happens smoothly & legally."
- The provision also aligns with broader mechanisms of paying tax, interest, and fees."
- It demonstrates how the Income Tax Act blends financial obligations with judicial procedures.
- It ensures fairness, orderliness, and enforceability of judicial decisions.
Conclusion
Section 266 may not be widely discussed, but it is one of those behind-the-scenes provisions that keeps the entire system functioning smoothly. It ensures that when the Supreme Court awards costs, those orders don’t just sit on paper — they are executed effectively through the correct judicial chain.
If you ever find yourself navigating appeals, tax litigation, or procedures involving courts and authorities, the experts at CallMyCA.com are always here to support you with clarity, warmth, & real human guidance.
