In a major move, a Division Bench of the Rajasthan High Court has recently directed the Income Tax Department to pay 6% interest for delayed refund under Direct Tax Vivad Se Vishwas Scheme (DTVSV Scheme).
In compliance with the Vivad Se Vishwas Act, 2020 (VSV Act), the petitioner submitted an application on 17/6/2020, addressing a dispute related to the Assessment Year 2013-14. Following necessary compliance, the petitioner received Form No. 3 of the VSV Act on 25/1/2021, indicating a refund of Rs.3,47,03,505/-. Subsequently, upon filing Form No. 4, the petitioner received Form No. 5 from the respondents on 8/3/2021, signifying the full and final settlement in accordance with Form No.3.
In light of the issued Form Nos. 3 & 5 under the VSV Act, the petitioner diligently pursued the issuance of the refund amount, totaling Rs.3,47,03,505/-. Despite receiving adjustments against various demands on different dates, namely Rs.11,86,641/- on 10/1/2022, Rs.2,59,48,974/- on 30/5/2022, Rs.70,476/- on 22/10/2021, and Rs.74,97,414/- on 20/1/2022, amounting to the full entitlement, the petitioner highlights a significant concern – no interest was paid for the delayed payment.
The learned counsel for the petitioner asserted that, while the entire entitled amount was paid on 8/3/2021 upon issuance of Form No.5 (Annex.9), the delay in refund disbursement warrants interest for the period it was withheld by the respondents after the petitioner’s entitlement.
Furthermore, it is emphasized that Section 244A (1) of the Income Tax Act, 1961 is applicable to the case. According to this provision, the petitioner contends that they are entitled to interest on the refunded amount for the period it was withheld by the respondents post the petitioner’s rightful entitlement on 8/3/2021.
The petitioner sought interest for the delay in payment as per the relevant legal provisions.
On the other hand, the respondent counsel, Sandeep Pathak with Jaya P. Patha, submitted that, the provisions of Section 244A of Income Tax Act 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.
The Division Bench of Justice Ashutosh Kumar and Justice Arun Bhansali observed that, the Delhi High Court in the case of Ms. Anjul while relying on one judgment of the Supreme Court in Union of India v. Tata Chemicals Limited 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 similar circumstances. The obligation to refund money received and retained without right implies and carries with it the right to interest.
It was thus directed that, “ 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. The payment of interest be made within 08 weeks from the date of this order”, the Rajasthan High Court Bench also added.
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