Facts of the Case

The petitioner, MUFG Bank Ltd., filed multiple writ petitions seeking refund of tax amounts along with applicable interest. Earlier, the Court had directed the respondents (Income Tax Department) to credit the refund amount along with interest to the petitioner’s account within a period of two weeks.

Subsequently, the respondent authorities filed applications seeking three weeks’ additional time to comply with the order dated 02 September 2020. The delay was attributed to disruptions caused due to COVID-19, as several officials had tested positive and were under isolation.

It was also noted that partial compliance had already been made in respect of certain assessment years.

Issues Involved

  1. Whether the respondent department should be granted additional time to comply with the Court’s earlier order directing refund with interest.
  2. Whether COVID-19 related administrative difficulties constitute sufficient ground for extension of time.
  3. Whether the interest on refund was correctly computed and paid.

Petitioner’s Arguments

  • The petitioner contended that although refund was granted, interest computation was incorrect, particularly for Assessment Year 2011–12.
  • It was argued that the respondent must strictly comply with the earlier court directions and ensure accurate calculation of interest 

Respondent’s Arguments

  • The respondent submitted that:
    • The earlier order had been substantially complied with for certain assessment years.
    • Due to COVID-19 outbreak, several officials were infected and the office remained non-functional due to isolation protocols.
    • Hence, additional time of three weeks was necessary to fully comply with the Court’s directions.

Court’s Findings / Order

  • The Delhi High Court allowed the applications filed by the respondents.
  • The Court granted three weeks’ additional time to comply with its earlier order dated 02 September 2020.
  • The Court clarified that:
    • The refund must be paid along with interest up to the actual date of payment.
    • A proper computation of interest must be provided along with the payment.

Important Clarifications by the Court

  • Interest under the Income Tax Act must be calculated till the date of actual refund payment, not merely till an earlier date.
  • Authorities are required to provide transparent computation details along with refund.
  • COVID-19 related administrative disruptions can be considered a valid ground for limited procedural extension, but compliance must still be ensured within the extended timeline.

Sections Involved

  • Income Tax Act, 1961
    • Section 244A – Interest on Refunds
  • Principles relating to compliance of court orders and grant of extension of time

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

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