Supreme Court to Decide Interest Liability for Delayed Payment to Income Tax Dept Counsel [Read Judgement]

The Supreme Court of India is set to examine the issue of whether interest must be paid for the delayed payment of professional fees to panel counsel representing the Income Tax Department.

The case arises from proceedings before the Delhi High Court concerning delays in the payment of bills submitted by panel lawyers who represent the Income TaxDepartment in various courts.

The Income Tax Department approached the Supreme Court by filing a Special Leave Petition challenging the order of the Delhi High Court, which had issued directions regarding the timely payment of counsel fees and the payment of interest in case of delay.

Before the High Court, the counsel representing the petitioners argued that panel counsel were facing significant delays in receiving their professional fees even after their bills had been approved by the department. They argued that such delays were contrary to the existing instructions issued by the Central Board of Direct Taxes (CBDT), which required the department to process and clear the bills of counsel within a prescribed time frame.

The petitioners further argued that even after scrutiny and approval of the bills by the concerned officers, the payments were not being released promptly due to administrative delays within the department.

The Division Bench comprising Justice S. Muralidhar and Justice Vibhu Bakhru observed that the CBDT had already issued instructions requiring that bills submitted by panel counsel should be scrutinized within thirty days and that any defects should be communicated within one week. The court observed that despite these instructions, several bills remained pending for long periods.

The High Court explained that once a bill had been approved, the payment process should not be unnecessarily delayed by internal administrative procedures. The court pointed out that such delays caused hardship to counsel who regularly represented the department in court proceedings.

The High Court issued directions stating that after approval of the bills, the payment should be made within three working days. It also directed that if the payment was delayed beyond this period, interest would be payable at the same rate that is applicable to income tax refunds.

The department later approached the Supreme Court challenging these directions and argued that the payment process involves several stages of verification through the accounts authorities and that the three-day timeline for releasing payments was not practical.

The Supreme Court has taken note of the matter and will now examine whether the directions issued by the Delhi High Court regarding interest liability for delayed payment to Income Tax Department counsel are legally sustainable.

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