Interest on delayed tax refunds: interest is payable for delay in payment of refunds determined under the settlement scheme.

Refunds determined by issuance of Form No.5 under the Direct Tax Vivad Se Vishwas Act are treated as refunds of tax for purposes of the Income-tax Act, and the statute-specific Explanation to section 7 (addressing amounts paid before declaration) does not operate to exclude interest on such refunds. Applying the principle that interest is payable as compensation for undue retention of State funds and absent an express exclusion in the special enactment, interest under section 244A is payable for delay beyond the prescribed period; appeals were allowed in favour of the assessee.

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Issues: Whether an assessee is entitled to interest under section 244A of the Income-tax Act, 1961 on refunds determined and payable by issuance of Form No.5 under the Direct Tax Vivad Se Vishwas Act, 2020, for delay in payment beyond the prescribed period.

Analysis: The issue arises where refunds were determined under the Direct Tax Vivad Se Vishwas Act, 2020 and Form No.5 was issued, but consequential Order Giving Effect under the Income-tax Act and payment/adjustment of refund were delayed beyond the statutory period. The Income-tax Act, 1961 provides for interest on refunds under section 244A(1)(b) for delays beyond prescribed timelines; procedural timelines for giving effect to appeal orders are reflected in section 153(5). The DTVSV Act is a self-contained scheme for settlement of disputes, but its Explanation to section 7 addresses refunds of amounts paid before filing a declaration and contains a proviso disallowing interest under section 244A in that specific context. Judicial authorities including the Supreme Court in Union of India v. Tata Chemicals Ltd. and several High Courts (Bombay, Rajasthan, Delhi, Allahabad, Kerala) have held that where the State has retained money without right and refund becomes due, interest is payable as compensation for undue retention; those decisions treated refunds arising on issuance of determinative orders as attracting interest under section 244A unless the special statute expressly and unambiguously excludes such interest. The Tribunal examined the statutory text of the DTVSV Act, the Explanation to section 7, the sequence of events (issuance of Form No.5, delay in consequential Order Giving Effect and payment), and relevant precedents, and concluded that the Explanation to section 7 pertains to payments made prior to filing declarations and does not operate to exclude interest on refunds that become due upon issuance of Form No.5. In light of binding and persuasive precedents, and the characterisation of refunds determined under Form No.5 as 'refund of tax' for purposes of the Income-tax Act, the Tribunal held that interest under section 244A is payable for delay beyond the statutorily prescribed period.

Conclusion: The assessee is entitled to interest under section 244A of the Income-tax Act, 1961 on the delayed refunds determined by issuance of Form No.5 under the Direct Tax Vivad Se Vishwas Act, 2020; the appeals are allowed in favour of the assessee.

Ratio Decidendi: Refunds determined by issuance of Form No.5 under the Direct Tax Vivad Se Vishwas Act, 2020 constitute refunds of tax for purposes of the Income-tax Act, 1961 and, unless a special enactment expressly excludes interest for refunds arising after issuance of Form No.5, interest under section 244A of the Income-tax Act, 1961 is payable for delay in payment beyond the prescribed period.

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