Bombay High Court
Ups Freight Services India Private ... vs Deputy Commissioner Of Income Tax ... on 28 August, 2023
Author: N. K. Gokhale
Bench: K. R. Shriram, N. K. Gokhale
2023:BHC-OS:9106-DB
Digitally 403-oswpl-10314-2023.doc
signed by
SHAMBHAVI
SHAMBHAVI NILESH
NILESH SHIVGAN
SHIVGAN Date:
2023.08.30
12:22:01
+0530
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION (L) NO. 10314 OF 2023
UPS Freight Services India Private Limited ... Petitioner
Versus
Deputy Commissioner of Income Tax Central
Circle-3-2 ... Respondent
Mr. Dharan Gandhi with Ms Aanchal Vyas for Petitioner.
Mr Vipul Bajpayee for Respondent-Revenue.
CORAM K. R. SHRIRAM &
DR. N. K. GOKHALE, JJ.
DATED: 28th August 2023
P.C. :
1. Petitioner was constrained to approach this Court in view of the failure of Respondent to refund amounts payable as reflected in Form No.5 dated 15th June 2021 issued under the Direct Tax Vivad Se Vishwas (DTVSV) Act, 2020 read with the Direct Tax Vivad se Vishwas Rules, 2020.
2. Form No.5 provides that the Designated Authority has issued a certificate dated 27th February 2021 showing an amount of Rs.62,81,983/- as refundable to Petitioner. The Central Board of Page 1 of 7 Shivgan ::: Uploaded on - 30/08/2023 ::: Downloaded on - 30/08/2023 21:42:40 ::: 403-oswpl-10314-2023.doc Direct Taxes, Ministry of Finance issued a Central Action Plan for 2021-22 in which Clause 9 (page 74) reads as under:
"9. JAOs to pass consequential orders and reduce demand or issue refunds, latest by 31.07.2021 in all VsV cases wherein Form 5 has been issued upto 30.06.2021. For all subsequent issue of Form 5, i.e. 01.07.2021 onwards JAOs may give necessary effect within 30 days."
(emphasis supplied)
3. Since Form No.5 has been issued on 15th June 2021, JAO was duty bound to pass consequential orders and issue refunds latest by 31st July 2021. Mr. Gandhi states that Petitioner had addressed various communications calling upon respondents to issue refund order and also pass orders giving effect under Section 5(2) read with Section 6 of the DTVSV Act, 2020. Notwithstanding the above, Respondent No.1 has passed the order giving effect only only on 21st June 2022, almost one year later. Despite that refund was not issued and respondents have driven Petitioner to approach this Court.
4. An affidavit-in-reply of one Uday Shankar (DCIT) currently holding the post as ACIT Central Circle 3(2), Bombay affirmed on Page 2 of 7 Shivgan ::: Uploaded on - 30/08/2023 ::: Downloaded on - 30/08/2023 21:42:40 ::: 403-oswpl-10314-2023.doc 5th July 2023 is filed in which it is mentioned Petitioner's refund has been issued and credited to the account of Petitioner on 26th May 2023 as per feed received from the State Bank of India. Except a bald statement in the affidavit that delay in issuing refund has been attributable to some technical issues, there is nothing substantial in the affidavit. There is no explanation/reply also to Petitioner's averments that as per the Central Action Plan, the refund was to be issued by 31st July 2021 and why even the order giving effect under Section 5(2) read with Section 6 of the DTVSV was passed only on 21st June 2022.
5. Mr. Gandhi says that now that the refund has been issued, Petitioner is entitled to some reasonable interest.
6. Mr Bajpayee submits, relying upon the affidavit in reply, that DTVSV Act does not provide for any interest on excess amount under Section 244A of the Income Tax Act, 1961 (the Act). In response, Mr. Gandhi relies on the judgment of the Hon'ble Delhi High Court in Mrs. Anjul v. Office of Principal Commissioner of Income-tax 1 to submit that the Hon'ble Delhi High Court relying 1 [2022] 145 taxmann.com 140 (Delhi) Page 3 of 7 Shivgan ::: Uploaded on - 30/08/2023 ::: Downloaded on - 30/08/2023 21:42:40 ::: 403-oswpl-10314-2023.doc upon the judgment of the Hon'ble Apex Court in Union of India v. Tata Chemicals Ltd.2 has held, 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 be under like circumstances. The obligation to refund money received and retained without right implies and carries with it the right to interest. Mr. Gandhi submits that in that case, Petitioner was an individual and the Court granted 5% simple interest. In the case at hand, Petitioner is a corporate entity, which has to borrow amount at very high rate of interest for paying these amounts and, therefore, this Court should grant at least the rate of interest which is provided for in Section 244A of the Act.
7. It will be useful to reproduce paragraph 2 of the circular 11/2016 (F.No.279/MISC./M-140/2015-ITJ] dated 26.4.2016 that Mr Gandhi tendered. It reads as under:
"2. The issue of eligibility for interest on refund of excess TDS to a tax deductor has been a subject matter of controversy and litigation. The Hon'ble Supreme Court of India in the case of Tata Chemicals Limited, Civil Appeal No.6301 of 2011 vide order dated 26.2.2014, held that "Refund due and payable to the assessee is debt-owed and payable by the Revenue. The Government, there being no 2 [2014] 43 taxmann.com 240 Page 4 of 7 Shivgan ::: Uploaded on - 30/08/2023 ::: Downloaded on - 30/08/2023 21:42:40 ::: 403-oswpl-10314-2023.doc express statutory provision for payment of interest on the refund of excess amount/tax collected by the Revenue, cannot shrug off its apparent obligation to reimburse the deductors lawful monies with the accrued interest for the period of undue retention of such monies. 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 be under like circumstances. The obligation to refund money received and retained without right implies and carries with it the right to interest. "
(emphasis supplied)
8. It will be apposite to re-produce paragraphs 37 and 38 of Tata Chemicals Ltd. (Supra) and the same reads as under:
"37. A "tax refund" is a refund of taxes when the tax liability is less than the tax paid. As per the old section an assessee was entitled for payment of interest on the amoun of taxes refunded pursuant to an order passed under the Act, including the order passed in an appeal. In the present fact scenario, the deductor/assessee had paid taxes pursuant to a special order passed by the assessing officer/Income Tax Officer. In the appeal filed against the said order the assessee has succeeded and a direction is issued by the appellate authority to refund the tax paid. The amount paid by the resident/deductor was retained by the Government till a direction was issued by the appellate authority to refund the same. When the said amount is refunded it should carry interest in the matter of course. As held by the Courts while awarding interest, it is a kind of compensation of use and retention of the money collected unauthorizedly by the Department. When the collection is illegal, there is corresponding obligation on the revenue to refund such amount with interest in as much as they have retained and enjoyed the money deposited. Even the Department has understood the object behind insertion of Section 244A, as that, an assessee is entitlted to payment of interest for money remaining with the Government which would be refunded. There is no Page 5 of 7 Shivgan ::: Uploaded on - 30/08/2023 ::: Downloaded on - 30/08/2023 21:42:40 ::: 403-oswpl-10314-2023.doc reason to restrict the same to an assessee only without extending the similar benefit to a resident/deductor who has deducted tax at source and deposited the same before remitting the amount payable to a non-resident/foreign company.
38. Providing for payment of interest in case of refund of amounts paid as tax or deemed tax or advance tax is a method now statutorily adopted by fiscal legislation to ensure that the aforesaid amount of tax which has been duly paid in prescribed time and provisions in that behalf form part of the recovery machinery provided in a taxing Statute. Refund due and payable to the assessee is debt-owed and payable by the Revenue. The Government, there being no express statutory provision for payment of interest on the refund of excess amount/tax collected by the Revenue, cannot shrug off its apparent obligation to reimburse the deductors lawful monies with the accrued interest for the period of undue retention of such monies. 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 be under like circumstances. The obligation to refund money received and retained without right implies and carries with it the right to interest. Whenever money has been received by a party which ex ae quo et bono ought to be refunded, the right to interest follows, as a matter of course."
(emphasis supplied)
9. In the present case, it is not in doubt that Petitioner was entitled to refund of Rs.62,81,983/- which ought to have been processed and paid latest by 31st July 2021. The amount as stated in the affidavit-in-reply has been paid only on 26th May 2023. Consequently, we are of the view that Petitioner is entitled to Page 6 of 7 Shivgan ::: Uploaded on - 30/08/2023 ::: Downloaded on - 30/08/2023 21:42:40 ::: 403-oswpl-10314-2023.doc interest on this amount of Rs.62,81,983/- from 1st August 2021 upto 26th May 2023 at the rate of 6% p.a. which is the rate prescribed under Section 244A of the Act.
10. As the amount of interest is being paid out of public ex- chequer, the Chief Principal Commissioner in-charge of Circle 3 (2), Mumbai shall hold an enquiry as to why the order u/s. 5(2) read with 6 of the DTVSV Act was not passed till 21st June 2022 and why the refund amount was not paid until 26th May 2023, identify where the fault was and may take such steps as available in law including recovering the interest paid to Petitioner from the erring officer (s).
11. Petitioner has also prayed for cost. Since we have awarded simple interest at 6% p.a. we are not granting any cost in this case. Respondents, are, however, put to notice that if such issues come in future, Court may even consider imposing cost to be recovered from the concerned officer's salary.
12. Petition is disposed.
(DR. N. K. GOKHALE, J.) (K. R. SHRIRAM, J.) Page 7 of 7 Shivgan ::: Uploaded on - 30/08/2023 ::: Downloaded on - 30/08/2023 21:42:40 :::