2018 (2) TMI 2133 - HC - Income Tax

Condonation of delay - Non granting refund of excess amount deducted by the assessee at source - Held that - If the petitioner is correct in pointing out that there has been a clear excess deduction of TDS and in depositing the Government revenue subject to fulfillment of conditions of the scheme petitioner must receive refund thereof. Unless the delay is gross or intentional or arising out of inaction and lethargy on the part of the petitioner tax mistakenly deposited cannot be retained by the Government on the ground of delay. CBDT undoubtedly has powers to condone the delay even if we assume the Commissioner does not have such powers. In the present case the dispute is lingering since quite some time. In any case the delay is not gross and the repercussion in law is not widespread. We may recall the last date for filing refund claim under the scheme was 31.03.2008. The petitioner upon coming to realize that excess deduction has been made and deposited with the Government approached the appropriate authority under letter dated 15.12.2008. Thus we propose to condone the delay here itself and then require the competent authority before whom the petitioner s application for refund is pending to decide the same on merits.

Summary

Issues:
Challenge to the action of the Income Tax department in refusing to grant a refund of excess TDS deducted by the assessee at source.

Analysis:
The petitioner, a company, deducted tax at source at a higher rate of 20% while making a payment of royalty to a foreign company. Later, it realized that the tax liability was only at 10% as per the Double Taxation Avoidance Agreement between India and France. The excess deduction of ?20,03,912 was requested to be refunded, but the authorities refused citing a circular with a limitation clause for refund claims. The petitioner approached the CBDT under Section 119 of the Act, seeking intervention due to a bonafide mistake. The CBDT had not responded to the petition, leading to the delay in refund processing.

The High Court observed that if there was a clear excess deduction of TDS, subject to scheme conditions, the petitioner should receive a refund. The court highlighted that unless the delay was gross or intentional, the tax mistakenly deposited should not be retained by the Government. Section 119 of the Act empowers the CBDT to issue orders for proper administration and to condone delays for genuine hardships. The court noted that the delay in this case was not gross, and the petitioner had approached the authority promptly upon realizing the excess deduction.

Consequently, the High Court decided to condone the delay and directed the competent authority to decide on the petitioner's refund application on its merits. The authority was instructed to make a decision in accordance with the law, preferably before a specified date. The petition was disposed of accordingly, emphasizing the need for a fair consideration of the refund claim based on the circumstances and legal provisions.