The Dispute in Brief
Dish TV India Limited successfully resolved a long-standing TDS dispute pursuant to the Direct Tax Vivad Se Vishwas Act, 2020, having duly complied with all procedural requirements under the scheme, including withdrawal of its pending appeal before the Allahabad High Court. Notwithstanding a government order confirming a refund of Rs. 2,19,42,954, the authorities failed to disburse the amount for a period exceeding two years.
Upon the company approaching the Hon'ble High Court for relief, the department contended that a fresh declaration was required to be filed. The Court rejected this contention and directed the authorities to release the refund along with applicable statutory interest, thereby upholding the sanctity of the settlement and affirming the company's entitlement to its dues.
Factual Background
The Assessing Officer assessed the TDS return of Dish TV India Limited for FY 2008–09 and, by order dated 31 March 2011, raised a demand of ₹40,56,14,101 under Sections 201 and 201(1A) of the Income-tax Act, 1961 for alleged short deduction of tax at source. Dish TV filed an appeal, and the Commissioner of Income Tax (Appeals) remanded the matter for fresh assessment on 21 August 2013. The Assessing Officer then issued a revised order on 18 November 2013 reducing the demand to ₹2,25,48,341, comprising a tax component of ₹6,05,387 and interest of about ₹2.19 crore, and issued a demand notice under Section 156 while withholding the equivalent refund.
The Income Tax Appellate Tribunal dismissed the appeal filed by Dish TV India Limited against the revised assessment on 29 February 2016. The company subsequently filed Income Tax Appeal No. 26 of 2018 before the Allahabad High Court, which remained pending when the Direct Tax Vivad Se Vishwas Act, 2020 scheme came into force.
In March 2021, Dish TV India Limited applied under the Direct Tax Vivad Se Vishwas Act, 2020 and declared the payable amount as ₹6,05,387, which represented the tax component of the demand. The authorities issued Form 3 certifying ₹2,19,42,954 as refundable. Dish TV then filed Form 4 and withdrew its pending appeal before the Allahabad High Court. On 20 September 2022, the department issued Form 5 confirming full and final settlement and recorded the refundable amount. However, the authorities did not release the refund despite several representations, which led to the filing of the present writ petition.
The Department's Position
After the filing of the writ petition, the department issued a communication dated 19 November 2024 asking Dish TV India Limited to submit its claim in Form 26B through the TRACES portal. The department further contended that Section 7 of the Direct Tax Vivad Se Vishwas Act, 2020 barred any entitlement to interest on the refund.
The Court's Analysis
On the issue of Form 26B, the Allahabad High Court held that the department’s position lacked legal basis. Form 26B is prescribed under the Income-tax Rules, 1962 for claiming a refund of excess TDS under Chapter XVII-B of the Income-tax Act, 1961, which related to the original FY 2008–09 proceedings that had already concluded. The court observed that the refund arose from a statutory settlement under the Direct Tax Vivad Se Vishwas Act, 2020, which does not require filing Form 26B. It also noted that the department raised this requirement almost two years after issuing Form 5 and only after litigation resumed, indicating that it was intended to deny the petitioner interest rather than address a genuine procedural requirement.
On interest, the department invoked the Explanation to Section 7 of the VSV Act, which reads as follows:
"...where the declarant had, before filing the declaration under sub-section (1) of section 4, paid any amount under the Income-tax Act in respect of his tax arrear which exceeds the amount payable under section 3, he shall be entitled to a refund of such excess amount, but shall not be entitled to interest on such excess amount under section 244A of the Income-tax Act."
The Allahabad High Court interpreted this provision and held that the Explanation governs only pre-declaration overpayments, which means thar amounts deposited under the Income-tax Act, 1961 before filing the declaration under the Direct Tax Vivad Se Vishwas Act, 2020 that exceed the liability determined under the scheme. The court further clarified that it does not affect the department’s obligation to pay a refund already determined and recorded in Form 5. This obligation arose independently on 20 September 2022, and any delay in payment falls outside Section 7 and is instead governed by general principles and Section 244A of the Income-tax Act.
The Allahabad High Court relied on the decision of the Delhi High Court in Ms. Anjul v. Office of PCIT, W.P.(C) No. 1985/2022, Delhi High Court, 23 August 2022, which in turn referred to the ruling of the Supreme Court of India in Union of India v. Tata Chemicals Limited, Civil Appeal No. 6301 of 2011, (2014) 6 SCC 335. In that case, the Supreme Court held that when the State retains money without authority, it must refund the amount along with interest, similar to the obligation that exists between private parties. The court found no reason to take a different view in the present case.
Decision
The Allahabad High Court allowed the writ petition and directed the authorities to pay ₹2,19,42,954 to Dish TV India Limited with interest at 6% per annum from 20 December 2022, which was ninety days after the issuance of the Form 5 order, until the date of actual payment. The court granted the department eight weeks to comply with the order.
Ratio Decidendi
The binding ratio rests on three propositions.
First, once a refund is determined under the Direct Tax Vivad Se Vishwas Act, 2020 and recorded in Form 5, the obligation to disburse the amount arises directly from that order. Form 26B, which is prescribed for excess TDS refunds under Chapter XVII-B of the Income-tax Act, 1961, does not apply within the VSV framework. The VSV Act operates as a complete statutory scheme with its own procedure. Therefore, any departmental insistence on filing Form 26B as a precondition for releasing a refund determined under the VSV Act has no legal basis.
Second, the interest bar in the Explanation to Section 7 of the Direct Tax Vivad Se Vishwas Act, 2020 applies only to pre-declaration overpayments made by the assessee. These are amounts deposited before filing the VSV declaration that exceed the liability determined under Section 3. The court clarified that this provision does not cover interest arising from the department’s delay in paying a refund after the issuance of Form 5. The two situations are legally distinct, and Section 7 addresses only the former.
Third, the court reaffirmed that when the State retains money that it is legally required to return, it must pay interest on that amount. The court relied on the principle laid down by the Supreme Court of India in Union of India v. Tata Chemicals Limited. Applying this principle, the court held that interest would run from ninety days after the Form 5 order, which it treated as a reasonable administrative period, at 6% per annum in accordance with Section 244A of the Income-tax Act, 1961.
Significance
This judgment settles two recurring issues under the Direct Tax Vivad Se Vishwas Act, 2020. First, the department cannot impose procedural requirements from outside the VSV framework as a condition for releasing refunds determined in Form 5. The scheme is self-contained, and once Form 5 is issued, the obligation to pay follows directly. Second, the interest bar under Section 7 applies only to amounts paid by the assessee before filing the VSV declaration. It does not cover delays by the department after the scheme concludes, and such delays attract interest on ordinary principles.
For assessees who opted for the VSV scheme but have not received their refunds, the judgment confirms that the Form 5 order has enforceable legal effect. Where the department withholds payment through inaction or unsupported procedural demands, relief under Article 226 becomes available, with interest running from ninety days after the settlement order.