Facts of the Case

The petitioners filed writ petitions seeking a direction to the Income Tax Department to decide their applications filed under Section 119(2)(b) of the Income Tax Act for refund of income tax. The tax had been inadvertently paid on interest received under Section 28 of the Land Acquisition Act for various assessment years.

The petitioners contended that such interest is not taxable income and therefore refund should be granted. However, their applications remained undecided for nearly four years.

Issues Involved

  1. Whether interest received under Section 28 of the Land Acquisition Act is taxable as income.
  2. Whether delay in deciding refund applications under Section 119(2)(b) is justified.
  3. Whether applications for refund were barred by limitation under CBDT Circular dated 09.06.2015.

Petitioner’s Arguments

  • The petitioners relied on CIT vs Ghanshyam Dass HUF (2009) 8 SCC 412, wherein the Supreme Court held that interest under Section 28 of the Land Acquisition Act is not taxable income.
  • It was argued that tax paid under mistake or misrepresentation can always be claimed as refund.
  • There was an unreasonable delay of nearly four years in deciding the applications, which violated CBDT Circular guidelines.

Respondent’s Arguments

  • The Revenue argued that subsequent High Court judgments have held that such interest is taxable under the head “Income from Other Sources.”
  • It was further contended that most of the refund applications were barred by limitation under CBDT Circular dated 09 June 2015.

Court’s Findings / Order

  • The Delhi High Court did not adjudicate on the merits of taxability.
  • Considering the limited relief sought, the Court directed the Income Tax Department to decide the pending applications within eight weeks in accordance with law.
  • All rights and contentions of both parties, including maintainability and limitation, were left open.

Important Clarification

  • The Court refrained from deciding whether such interest is taxable.
  • The judgment emphasizes administrative accountability and timely disposal of applications under Section 119(2)(b).
  • It reinforces that authorities must act within a reasonable time when statutory remedies are invoked.

Sections Involved

  • Section 119(2)(b), Income Tax Act, 1961 – Power to condone delay and grant relief
  • Section 28, Land Acquisition Act, 1894 – Interest on compensation
  • CBDT Circular dated 09 June 2015

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2020:DHC:2350-DB/MMH23072020CW44892020_204948.pdf


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