In the case of Group M Media India Pvt. Ltd.[1] (taxpayer), the issue before the Bombay High Court (HC) pertained to whether the taxpayer was eligible for interest on delayed refund of Equalisation levy (EL) withheld during the tax year (TY) 2018-19, despite the fact that Finance Act, 2016 [2] does not have any express provision for payment of interest on refund.
In this regard, Bombay HC relied on the Supreme Court (SC) decision in the case of UOI v. Tata Chemical Ltd.[3] , wherein the SC was concerned with interest on refund of taxes withheld by the taxpayer/deductor on payment made to non-resident taxpayer under Income-tax Act, 1961. The SC, inter-alia, held that the obligation to refund money, received and retained without right, implies and carries with it the right to interest. Accordingly, the SC held that absence of express statutory provision cannot shrug off the obligation to reimburse the taxpayer/deductor with the accrued interest for the period of undue retention of such monies. Basis the above SC decision and subsequent SC[4] decisions as also a CBDT Circular [5] which clarified that deductor will be eligible for interest at the rate of 6% p.a. on refund, HC ruled in favor of the taxpayer and directed tax authorities to pay interest on refund of EL at the rate of 6% p.a.[6] on or before 15 February 2024 and on default thereof, an additional 3% interest was directed to be paid to taxpayer which shall be recovered from the defaulting tax officer.
[1] TS-781-HC-2023(BOM) dated 18 December 2023
[2] EL was introduced vide Finance Act, 2016
[3] [2014] 43 taxmann.com 240 (SC)
[4] Universal Cables Ltd. vs. CIT, [2020] 113 taxmann.com 353 (SC); UPS Freight Services India Pvt. Ltd. vs. DCIT, W.P. (L) No. 10314 of 2023 dated 28 August 2023
[5] Circular No. 11/2016 dated 26 April 2016
[6] At par with interest on refund granted under the Income-tax Act, 1961
