Deposits made under protest remain refundable when tax liability is not crystallised and retention lacks authority of law.
Money deposited under protest does not become tax unless liability is crystallised by self-assessment or an assessment-related order. Where no assessment, reassessment or revision order exists and the time for such action has expired, continued retention of the deposit lacks authority of law and offends Article 265 of the Constitution. In that situation, the refund claim can be maintained under Article 226, and the sum is refundable with interest from the date the refund application was first made. The authorities were directed to return the deposited amount with simple interest at 6% per annum.
Issues: Whether the amount deposited under protest could be retained by the authorities in the absence of any assessment, reassessment or revision order, and whether the petitioners were entitled to refund with interest.
Analysis: The amount was paid under protest and no return or adjudicatory order had crystallised any tax liability for the relevant year. The time for reassessment and revision had expired, and the record disclosed no order authorising continued retention of the sum. A deposit made without crystallised liability remained a deposit and not tax. Retention of such money without authority of law offended Article 265 of the Constitution of India, and the claim for refund could be entertained under Article 226 of the Constitution of India. The Court also treated the amount as refundable with interest from the date when the refund application was first made.
Conclusion: The issue was answered in favour of the petitioners. The respondents were directed to refund the deposited amount with simple interest at 6% per annum.
Ratio Decidendi: Money deposited under protest does not acquire the character of tax unless liability is crystallised by self-assessment or an assessment-related order, and any retention of such amount without authority of law is refundable under Article 265 of the Constitution of India.
TaxTMI 
AI Drafter ✕
TaxTMI 
