Facts of the Case

  • The petitioner, a non-resident foreign company incorporated under the laws of Spain, filed return of income declaring NIL income.
  • The Assessing Officer passed an order under Section 143(3), assessing taxable income.
  • The Commissioner of Income Tax (Appeals) upheld findings regarding Permanent Establishment (PE) and attribution of income.
  • The Income Tax Appellate Tribunal (ITAT) partly allowed the appeal and accepted NIL income.
  • The High Court earlier upheld the ITAT findings, affirming NIL income.
  • Consequently, the petitioner became entitled to refund of taxes paid.
  • Despite making an application dated 5 August 2021, the refund was not processed by the authorities.

Issues Involved

  1. Whether the petitioner is entitled to refund of taxes under Section 240 of the Income Tax Act pursuant to appellate orders?
  2. Whether refund can be withheld merely because appeals are pending before the Supreme Court?
  3. Whether the writ petition is maintainable despite delay or multiple assessment years being involved?

Petitioner’s Arguments

  • The petitioner argued that appellate proceedings had culminated in acceptance of NIL income.
  • Therefore, the entire tax paid became refundable along with interest.
  • It was contended that mere pendency of appeal before the Supreme Court does not justify withholding of refund when no stay has been granted.
  • The authorities failed to act upon the refund application despite repeated reminders.

Respondent’s Arguments

  • The respondents contended that the petition sought refund for nearly twenty assessment years in one proceeding.
  • It was argued that no recent cause of action had arisen, making the writ petition not maintainable.

Court’s Findings / Order

  • The Court held that failure to decide the refund application constitutes a valid cause of action.
  • It recognized that Section 240 embodies the right of an assessee to receive refund arising from appellate orders.
  • The Court directed the Income Tax Department to process and grant refund along with applicable interest within three months.

Important Clarifications by Court

  • Refund process shall be subject to the outcome of pending appeals before the Supreme Court.
  • The Court clarified that it has not expressed any opinion on the quantum of refund.

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2021:DHC:4197-DB/MMH15122021CW142952021_145826.pdf

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