Entitlement to interest on refunded amount under the Finance Act, 2016 based on legal precedents and interpretations.

JUDGMENT :

K.R. SHRIRAM, J.

1. Since pleadings have been completed, we decided to hear the petition at the admission stage itself.

2. Therefore, Rule. Rule made returnable forthwith.

3. Petitioner has approached this Court alleging that there is failure on the part of respondents to release the undisputed refund due and determined by respondents themselves in the intimation/order issued under Section 168(1) of the Income Tax Act, 1961 (the Act) for Financial Year 2017-2018 corresponding to Assessment Year 2018-2019 despite reminders sent and for a direction to respondents to refund an admitted amount of Rs.4,23,60,940/- plus interest thereon.

4. Mr. Gandhi states that after the petition was filed, petitioner received an amount of Rs.4,23,60,940/- towards refund on 21st August 2023 but no interest has been paid.

5. Mr. Singh appearing for respondents states that the question of paying any interest does not arise because the Act does not provide for payment of any interest in cases of this nature.

6. Petitioner has been availing specified services as defined in clause (i) of Section 164 of the Finance Act, 2016 which came into force with effect from 1st April 2016. Section 164 of the Finance Act, 2016 provides in clause (i), unless the context otherwise requires – “specified service” means online advertisement, any provision for digital advertising space or any other facility or service for the purpose of online advertisement and includes any other service as may be notified by the Central Government on this behalf.

7. The equalisation levy under Chapter VIII of the Finance Act, 2016 came to be introduced due to exponential increase in digital economy, which due to digital presence, without any physical presence in India posed challenges in levy of tax under the Act. Due to absence of any physical presence, the Act was unable to bring within the ambit of tax all such transactions. The Organization for Economic Co-operation and Development (OECD) has recommended, in Base Erosion and Profit Shifting (BEPS) project under Action Plan 1, several options to tackle the direct tax challenges, including levy of a final withholding tax on certain payments for digital goods or services provided by a foreign e-commerce provider or imposition of a equalisation levy on consideration for certain digital transactions received by a non-resident from a resident or from a non-resident having permanent establishment in other contracting state. Accordingly, the Legislature introduced Equalisation Levy vide Finance Act, 2016. Some of the facets of such levy are as under :

(a). Equalisation Levy is a tax paid/deducted on specified services availed at the rate of 6% of the amount of consideration paid for such services as per Section 165 of the Act;

(b). Specified service has been defined in Section 164(i) of the Act to mean online advertisement, any provision for digital advertising space or any other facility or service for the purpose of online advertisement and includes any other service as may be notified by the Central Government in this behalf;

(c). The charge of tax is on the recipient of the services and such person has to deduct tax from the amount of consideration as per Section 166 of the Act;

(d). Such tax is to be paid to the credit of the Central Government by the seventh day of the month immediately following the calendar month in which such amount is deducted;

(e). Assessee is required to furnish a statement under Section 167 of the Act to the Assessing Officer in such form, verified in such manner and setting forth such particulars as may be prescribed, in respect of all specified services during such financial year;

(f). Such statement furnished has to be processed under Section 168 of the Act, and after processing the sum payable or refundable shall be determined and intimated to the assessee;

(g). Refund, if any, determined has to be granted with the intimation;

(h). Similarly, there are provisions for rectification of mistakes, appeal, penalty an