2023 (12) TMI 353 - HC - Income Tax

Payment of interest on the amount of refund as due against the respondents - settlement of disputes under Vivad Se Vishwas Act - As argued provisions of Section 244A have no application, on the other hand Explanation to Section 7 of the VSV Act, 2020 specifically prohibits grant of any interest and application of provisions of Section 244A of the Income Tax Act and, therefore, the petition deserves dismissal - HELD THAT - A perusal of Form No. 5 (Annex.9) clearly reveals that the order has been passed by the designated authority under the VSV Act, 2020 and Rules determining the amount of Rs.3,47,03,505/- refundable to the petitioner in accordance with the provisions of the Act. Once the order in Form No. 5 has been issued on 8/3/2021, the petitioner became entitled for the amount of refund. Admittedly, the said amount was refunded to the petitioner/adjustment towards the demands on 22/10/2021, 10/1/2022, 20/1/2022 and 30/5/2022. No reason worth the name has been indicated in response for the delay in refunding the amount to which the petitioner became entitled on passing of order in Form No.5 way back on 8/3/2021. The Delhi High Court in the case of Ms. Anjul 2022 (8) TMI 1438 - DELHI HIGH COURT while relying on one judgment of Hon ble Supreme Court in Union of India v. Tata Chemicals Limited 2014 (3) TMI 610 - SUPREME COURT held that the State having received the money without right and having retained and used it, is bound to make the party good, just as an individual would do under like circumstances. The obligation to refund money received and retained without right implies and carries with it the right to interest. Bombay High Court in the case of UPS Freight Services 2023 (9) TMI 34 - BOMBAY HIGH COURT while following the order in the case of Ms. Anjul (supra) also ordered for payment of interest as per the rate prescribed under Section 244A of the Income Tax Act in similar circumstances. So far as the plea raised by learned counsel for the respondents with reference to provisions of Explanation to Section 7 of VSV Act, 2020 is concerned, the same has been noticed for rejection only. A bare perusal of the Explanation would reveal that the Explanation pertains to payment of any amount under the Income Tax Act for the period before filing the declaration under subsection (1) of Section 4 of the VSV Act, 2020 and nothing to do with the entitlement to interest for the period after issuance of Form No.5 indicating entitlement of the petitioner to the amount of refund. Thus for the delayed payment, the petitioner is entitled to interest on the refund amount for the delay beyond the period of 90 days from the date of refund i.e. 8/3/2021. WP allowed - It is directed that the respondents-revenue shall make payment of interest @ 6% p.a. on the delayed refund amount w.e.f. 8/6/2021 i.e. beyond the period of 90 days from the date of determination of refund amount on 8/3/2021 till the date of actual/last payment. As the payment/adjustment has been made on various dates, interest would be calculated on the balance amount till each respective date.

Summary

Issues Involved:
The petitioner seeks direction for payment of interest on the refund amount due against the respondents. The main issue is whether the petitioner is entitled to interest on the delayed refund amount as per the provisions of the Income Tax Act and the Vivad Se Vishwas Act, 2020.

Summary:

Issue 1: Entitlement to Interest on Refund Amount
The petitioner filed an application under the Vivad Se Vishwas Act, 2020 for settlement of disputes and was granted a refund of Rs.3,47,03,505. Despite receiving the refund through adjustments against demands, no interest was paid for the delayed payment. The petitioner contends that they are entitled to interest on the amount as per Section 244A (1) of the Income Tax Act, 1961.

Issue 2: Applicability of Legal Precedents
The petitioner relies on the judgments in Anjul vs. PCIT by the Delhi High Court and UPS Freight Services India Pvt. Ltd. Vs. Deputy Commissioner of Income Act by the Bombay High Court, which ordered payment of interest in similar circumstances.

Issue 3: Interpretation of VSV Act Provisions
The respondents argue that the Explanation to Section 7 of the Vivad Se Vishwas Act, 2020 prohibits the grant of any interest on refunds. However, the court notes that this provision pertains to amounts paid before filing a declaration under the Act and does not address entitlement to interest post-refund determination.

Judgment:
The court observes that the petitioner became entitled to the refund amount upon the issuance of Form No. 5 under the VSV Act on 8/3/2021. Despite delays in refunding the amount, no valid reasons were provided. Citing legal precedents, the court affirms the petitioner's entitlement to interest on the delayed refund amount. Consequently, the writ petition is allowed, directing the respondents to pay interest at the rate of 6% per annum on the delayed refund amount from 8/6/2021 until the date of actual payment, to be calculated and paid within 08 weeks from the date of the order.