Facts of the Case

  • The petitioner, MUFG Bank Ltd., filed multiple writ petitions seeking refund of amounts along with interest.
  • The Court had earlier (order dated 02 September 2020) directed the respondents (Income Tax Department) to credit the refund amount with interest within two weeks.
  • The respondent filed applications seeking three weeks’ additional time to comply.
  • The delay was attributed to COVID-19 infections among staff, resulting in isolation and disruption of work.
  • The petitioner also raised an issue regarding incorrect computation of interest for Assessment Year 2011–12.

 Issues Involved

  1. Whether additional time should be granted to the Income Tax Department for compliance with refund orders.
  2. Whether interest on refunds must continue until actual payment is made.
  3. Whether the computation of interest can be challenged separately by the petitioner.

 Petitioner’s Arguments

  • The petitioner accepted notice but contended that:
    • Interest amount was not properly computed, particularly for AY 2011–12.
  • Sought liberty to file an appropriate application for correction of interest calculation.

 Respondent’s Arguments

  • The respondent (Income Tax Department) submitted that:
    • The order dated 02 September 2020 had been partially complied with.
    • Due to COVID-19 outbreak and staff isolation, timely compliance was not possible.
    • Requested three weeks’ extension to complete compliance.

 Court’s Findings

  • The Court acknowledged:
    • The extraordinary circumstances caused by COVID-19.
    • Partial compliance already made by the department.
  • The Court found the request for extension reasonable under the circumstances.

 Court Order / Judgment

  • The Court allowed the applications.
  • Granted three weeks’ additional time to the respondent to comply with the earlier order.
  • Clarified that:
    • Interest must be paid till the actual date of payment.
    • Detailed computation of interest must be provided along with payment.
  • Liberty granted to the petitioner to challenge incorrect interest computation separately.

 Important Clarifications by Court

  • Interest under tax refund provisions is not limited to the original deadline but extends until actual realization/payment.
  • Administrative difficulties (including pandemic situations) may justify reasonable extension, but not waiver of statutory obligations.
  • Tax authorities must ensure transparent calculation of interest.

Sections Involved

  • Section 244A of the Income Tax Act, 1961 (Interest on Refunds)
  • Relevant provisions relating to refund compliance under Income Tax Law

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2020:DHC:2788-DB/MMH17092020CW18882020_163913.pdf

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