TaxTMI 
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2026 (3) TMI 267
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....ply mutatis mutandis to other appeals. 2. The grounds of appeal are as under:- 1. On the facts and in law, the Ld. CIT(A) erred in confirming the order passed by Ld JAO denying interest of Rs. 1,11,67,193/- @ 6% claimed by the Appellant Assessee in respect of tax refund of Rs. 11,16,71,928/- determined under Direct Tax Vivad Se Vishwas Act, 2020 which was released / adjusted after delay of 20 months. CIT(A) failed to appreciate that said claim of interest is allowable either u/s 244A of Income Tax Act OR under principles of fairness and natural justice and principles of unjust enrichment as held by Various Courts in decisions cited before the CIT(A) like (a) Hon'ble Apex Court in UOI v. Tata Chemicals Ltd. [363 ITR 658 SC) (b) Hon'ble Bom HC in UPS Freight Services India (P.) Ltd. v. DCIT [2023] 156 taxmann.com 489 (Bombay) and Hon'ble Rajasthan High Court in Dwejesh Acharya v. Income Tax Officer [2023] 157 taxmann.com 332. 3. In this case of a Public Sector undertaking of Government of India, the assessee filed VSVS application as per under Direct Tax Vivad Se Vishwas Act, 2020(DTVSV).The ld.Pr.CIT while accepting the application passed order determining....
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....ed that Article 265 of Constitution of India provides that "No tax shall be levied or collected except by authority of law." The Union List, also known as List I, is part of the Seventh Schedule of the Constitution that lists subjects on which the Parliament of India has exclusive power to legislate. Entry 82 of Union List covers "Taxes on income other than agricultural income". Accordingly, Income Tax Act was legislated, with approval of Parliament, empowering Central Government to levy tax on income. This is followed by Finance Act, which is passed by Parliament every year, among others, prescribing rate of tax. Thus, the Act and Finance Acts are the legislations that empower Central Government to levy and collect tax on income. Power to levy tax comes with liability to give refund of tax collected excessively. 4.2 Attention has been drawn to the DTVSV Act 2020 and the Statement of Objects and Reasons to The Direct Tax Vivad se Vishwas Bill 2020 presented on 1stFebruary 2020.Ultimate purpose of the Bill is 'dispute resolution". It does not determine tax payable or refundable. Under the DTVSV Act 2020, in a case where income is disputed, disputed tax is computed at 100% in acco....
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....erest 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. 4.6 It is submitted that once the Hon'ble Apex Court gives a ruling, it becomes 'The Law of The Land'. Reliance is also placed on the decision of Hon'ble Mumbai ITAT in the case of Deutsche Bank A. G. Vs The Deputy Director of Income Tax (International Taxation) ITA No. 3789/Mum/2010 wherein interest on interest was allowed following decision of Hon'ble Apex Court in H.E.G. Ltd. in 324 ITR 331 (SC). 4.7 It is pleaded that denial of refund will lead to absurd results. Major part of the refund has been adjusted against the then e....
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....T, (2024) 162 taxmann.com 152 (Mad) in the WP Nos. 1039 & others of 2021 and 2024. 5.2 It is further stated that DTVSV Act, 2020 bars refund provided for in the Act. The DTVSV Act, 2020 is a complete Code in itself. This is evident from its scheme and the statutory prescription provided therein, it relates to realization of tax arrears by elimination or the avoidance or the deemed cessation of litigation, In this regard, it is apposite to refer to Section 7 of the DTVSV Act along with its explanation. This reads as under- "7. Any amount paid in pursuance of a declaration made under section 4 shall not be refundable under any circumstances. Explanation. - For the removal of doubts, it is hereby clarified that where the declarant had, before filing the declaration under sub-section (1) of section 4, paid any amount under the Income-tax Act in respect of his tax arrear which exceeds the amount payable under section 3, he shall be entitled to a refund of such excess amount, but shall not be entitled to interest on such excess amount under section 244A of the Income-tax Act. 5.3 It is argued that the explanation to Section 7, as extracted above, plainly and unamb....
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.... Circular also does not provide for grant of any interest. This Circular also nowhere speaks about the applicability of section 244A of the Act or giving of any interest on the refund determined under DTVSV Act. 5.6 It is also stated that Form 5 was issued during the peak of the Covid Period on 30.12.2020 and 22.03.2021. The offices were running at that time with bare minimum staff. Further, the timelines for various processes were also extended by the Apex Court. In this context, it would be pertinent to mention that by virtue of the Order dated 10.01.2022 in the In Re: Cognizance for Extension of Limitation in Suo Motu W.P. (C) No. 3 of 2020, the Supreme Court had extended all limitations, whether under the general or special laws, for a further period of 90 days from 01.03.2022. In the event the actual balance period of limitation remaining, with effect from 01.03.2022 is greater than 90 days, that longer period shall apply. The claim of the appellant of delay of 20 to 22 months is, therefore, factually not correct. 6. In the rejoinder, the ld.AR has contended that the Ld. DR placed reliance on the decision of Hon'ble Madras High Court in the case of Ansaldo Energia SPA v ....
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....ng from the cited decisions above. It is noticed that the ld.PCIT issued Form no.5 accepting the application of the assessee on 22.03.2021 whereby it was entitled to refund. The AO should have passed OGE within 90 days i.e. upto 20.06.2021 which was actually passed on 18.08.2022 and the refund was issued on 05.01.2023 after a delay of 20 months. Therefore, the assessee claimed interest @6 % on the refundable amount of Rs 11.16 cr. 7.1 The assessee has claimed interest on refund on the principles of fairness and justice and denial of unjust enrichment. It has heavily relied on hon'ble jurisdictional High Court decision in the case of UPS Freight Services India P.Ltd vs DCIT(2023) 156 Taxmann.com 489(Bom) and also on the decision of hon'ble Rajasthan High Court in Dwejesh Acharya 157 Taxmann.com 332(Raj), Anjul vs PCIT(WP(C) No.1985 of 2022 145 Taxmann.com140(Delhi) and hon'ble Apex Court in UOI vs Tata Chemicals Ltd 363 ITR 658.It is noted that the ld.CIT(A) has not considered these cited decisions which appear to be directly applicable to the facts of the case. 7.2 The relevant extracts of the decision of hon'ble Bombay High Court in the case UPS Freight Services India P.Ltd ....
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....ragraphs 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 amount 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 e....
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....ion to the respondents for payment of interest on the amount of refund as due against the respondents. 2. Submissions have been made that pursuant to Vivad Se Vishwas Act, 2020 ('VSV Act') for settlement of disputes, the petitioner filed an application on 17/6/2020 for the dispute relating to Assessment Year 2013-14 and after making necessary compliance got the Form No. 3 of the VSV Act on 25/1/2021 indicating a refund of Rs. 3,47,03,505/-. Whereafter, on filing Form No. 4, the petitioner received Form No. 5 from the respondents under VSV Act on 8/3/2021 indicating that full and final settlement has been done in accordance with Form No.3. 3. Pursuant to the Form Nos. 3 & 5 as issued by the respondents under VSV Act, the petitioner made several representations for issuing refund of Rs. 3,47,03,505/-. After making several requests, the petitioner received/got adjustment against demands for 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 totaling Rs. 3,47,03,505/-, however, no interest was paid for the delayed payment. 4. Learned counsel for the petitioner made submissions that t....
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....ng retained and used it, is bound to make the party good, just as an individual would do under like circumstances. The obligation to refund money received and retained without right implies and carries with it the right to interest. 12. Bombay High Court in the case of UPS Freight Services (supra) while following the order in the case of Ms. Anjul (supra) also ordered for payment of interest as per the rate prescribed under Section 244A of the Income Tax Act in similar circumstances. 13. So far as the plea raised by learned counsel for the respondents with reference to provisions of Explanation to Section 7 of VSV Act, 2020 is concerned, the same has been noticed for rejection only. 14. The provision of Section 7 of VSV Act, 2020 reads as under: "7. Any amount paid in pursuance of a declaration made under section 4 shall not be refundable under any circumstances. Explanation.- For the removal of doubts, it is hereby clarified that where the declarant had, before filing the declaration under sub-section (I) of section 4, paid any amount under the Income-tax Act in respect of his tax arrear which exceeds the amount payable under section 3,....
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....sued 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 entitled to payment of interest for money remaining with the Government which would be refunded. There is no 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 metho....
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....e Petitioner 's case. Consequently, the present petition succeeds and the Respondent is directed to pay a sum of Rs. 4,39,010/- to the Petitioner within a period of Twelve (12) weeks from the date of receipt of a copy of this judgment. If the same is not paid within the time prescribed in this judgment, the said sum shall bear an interest of 12% from the date of this judgment till the date of actual payment of the sum. Rule is made absolute to the aforesaid extent. No order as to costs. 7.5 Likewise, the hon'ble Kerala High Court in Satwashi V. Mane(2025) 173 taxmann.com 105(Ker) has passed similar order. Honble Delhi High Court in the case of GE Capital European Treasury Services Ltd(2025) 170 taxmann.com 301(Del) also allowed similar claim of interest u/s 244A of the Act. 7.6 The Direct Tax Vivad Se Vishwas Act, 2020, was enacted to reduce pending income tax litigation by providing a mechanism for settlement of tax disputes. A key aspect of this settlement is the payment of agreed upon tax arrears and the issuance of refunds where applicable. While the DTVSVA provides a settlement mechanism, any refund arising from such a settlement is still a "refund of tax" for the purpos....
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....nd money received and retained without right implies and carries with it the right to interest. Consequently, the Hon'ble Apex Court directed that the petitioner was entitled to interest on refund which was delayed beyond the period of 90 days from the date of determination of the refund amount i.e. 05.04.2021. 7.8 It may also be stated that the hon'ble coordinate bench of ITAT Mumbai in the case of Deutsche Bank A.G., Mumbai in ITA 3789/3790 and 4182Mum/2010 also allowed the claim of interest on interest by following the hon'ble Apex Court decisions in Sandvik Asia Ltd. V. CIT (2006) 280 ITR 643 (SC), CIT vs. H.E.G. Ltd.(2010) 189 Taxman 335 (SC) : 324 ITR 331 (SC) though there is no express provision in the Act in this regard. Relevant parts of the order are reproduced as below: "2. The common ground taken by the assessee in all these appeals reads as under:- "The Commissioner of Income-tax (Appeals) - 10 Mumbai (CIT(A) ought to have held that the appellants had suffered loss of revenue on account of interest under section 244A on the refund that was rightly due as well as potential income it would have earned on interest if it would have received it on t....
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...." 9. In the Development Bank of Singapore Ltd. (supra) the Tribunal directed the A.O. to allow interest on interest in accordance with the decision of the Hon'ble Supreme Court in the case of Sandvik Asia Ltd. (supra). 10. Respectfully following the authoritative pronouncement of the Hon'ble Supreme Court in H.E.G. Ltd. (supra) we are of the view that all the decisions relied on by the Revenue are distinguishable and not applicable to the facts of the present case. This being so we direct the A.O. to allow the interest u/s 244A in accordance with the decision of Hon'ble Apex Court in the case of H.E.G. Ltd. (supra). The common grounds taken by the assessee in all these three appeals are, therefore, allowed." 7.9 Generally the decisions or orders of higher authorities are binding on the lower authorities i.e. the judgment of Supreme Court is binding on all High Courts, lower courts. The judgment of High Court is binding all lower courts. Article 141 of the Constitution of India provides that the law declared by the Supreme Court shall be binding on all courts within the territory of India. But as regard the application of precedents of the High Court....