Back
ONGC entitled to 6% interest on delayed refund from :
The has ruled that is entitled to on the delayed refund of amounts under the , with the interest period commencing from —the date set by the 's own Central Action Plan—rather than from the later date when the tax department passed a . A Division Bench of Justice A.S. Supehia and Justice Vaibhavi D. Nanavati rejected the Revenue's argument that the three-month under should govern the timing of such refunds.
The Dispute Over Interest on Refund
ONGC had filed declarations under the Vivad se Vishwas scheme for the assessment years 2010-11 and 2012-13. Form-5, the certificate confirming completion of the settlement, was issued on , recording that the amount determined was nil because ONGC had already deposited the tax arrears. Under the scheme, the department was required to refund this amount. However, the giving effect to Form-5 was passed only on , and the actual refund was credited to ONGC's account on —a delay of 1,013 days.
The tax department initially granted interest only from (the month after the ) to . ONGC challenged this, arguing that interest should run from , in line with Clause 9 of the 's Central Action Plan for 2021-22, which directed that consequential orders and refunds in Vivad se Vishwas cases where Form-5 was issued up to , must be completed by .
's Own Timeline Cannot Be Ignored
The Revenue contended that the Circular No. 03 of 2021 required the Assessing Officer to pass a under the Income Tax Act, and that the three-month limitation under Section 153 of the IT Act applied. The court rejected this argument emphatically.
"The timeline given in the provision of cannot be resorted to, for passing the consequential orders under VsV Act, 2020,"
the bench observed.
The court noted that neither the circular nor the Central Action Plan referred to Section 153. The circular merely directed that consequential orders be passed, without prescribing any time limit. In contrast, Clause 9 of the Central Action Plan specifically set a deadline of , for cases where Form-5 was issued before . Since ONGC's Form-5 was issued on , this deadline applied.
"The
has already clarified the cut-off date of passing
by 31.07.2021... we are not inclined to further clarify the time/period of passing the consequential orders,"
the court stated.
Rejecting the Three-Month Limitation Argument
The court distinguished its earlier decision in , where the assessee had claimed interest from the date of the itself, not from the date of Form-5. It also noted that the Revenue had not actually relied on Section 153 when passing its own orders under ; instead, it had relied on the earlier decisions.
The bench held that the Vivad se Vishwas Act is a special enactment that does not provide for a separate after Form-5. The requirement for such an order was introduced by the 's circular and action plan. The department could not disown its own clarified timeline.
Key Observations
The court drew on the 's ruling in , which recognized interest as of money.
"Interest is a kind of compensation of use and retention of the money collected unauthorizedly by the Department, and is statutorily embedded in the provisions of
,"
the bench quoted.
It further emphasized:
"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
money received and retained without right implies and carries with it the
."
Final Order
The court directed the tax department to pay on the refund amount from (the day after the 's deadline of ) until (the date the refund was actually credited). The department was given six weeks to comply. If the amount is not paid within that period, it will carry further interest at 9% per annum, which may be recovered from the erring officer.
The petitions were partly allowed, with the court making it clear that the Revenue could not use the absence of a statutory timeline under the Vivad se Vishwas Act to delay refunds indefinitely.
