The Supreme Court reaffirmed that bona fide purchasing dealers cannot be denied input tax credit merely because the selling dealer failed to deposit the tax,

provided the purchaser acted in good faith and met the statutory conditions.

It was decided by the Supreme court in the case of Commissioner of Trade & Tax, Delhi v. M/s Shanti Kiran India (P) Ltd. that purchasing dealers cannot be denied input tax credit merely

because the selling dealer failed to deposit the tax.

Relevant Statutory Provision

• Section 9(1) of DVAT Act gives input tax credit to a purchasing dealer under certain conditions. Indian Kanoon+1
• Section 9(2) lists circumstances when input tax credit cannot be allowed, including after amendment clause (g): “unless the tax paid by the purchasing dealer has actually been
• deposited by the selling dealer with the Government or has been lawfully adjusted…” Indian Kanoon+1
• Importantly: Clause (g) was introduced by amendment effective 1‑4‑2010 — i.e., it did not apply to the period during which
• the disputed transactions took place (2007‑08).