Bombay HC Upholds Section 234D Interest on Pre-1 June 2003 Excess Refunds

CIT Vs Patel Engineering Ltd (Bombay High Court)

The Bombay High Court allowed the Revenue’s appeal and held that interest under Section 234D of the Income Tax Act on excess income tax refunds applies even to refunds issued before June 1, 2003. The only substantial question before the Court was whether Section 234D had retrospective application to refunds granted prior to its introduction. During the hearing, the assessee acknowledged that the issue had already been decided by the Bombay High Court in an earlier judgment, which had ruled in favour of the Revenue. Agreeing that the issue was covered by the previous decision, the Court held that no fresh adjudication was required. Accordingly, it answered the substantial question of law in favour of the Revenue, set aside the Income Tax Appellate Tribunal’s order for Assessment Year 2002–03, allowed the appeal, and made no order as to costs.

FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT

By order dated 18^th March, 2026, the following substantial questions of law had been framed to be urged in this Income Tax Appeal filed by the Revenue under Section 260A of the Income Tax Act, 1961, assailing the judgment and order dated 26^th September, 2008 passed by the learned Income Tax Appellate Tribunal, ‘H’ within Mumbai Bench in ITA No. 4182 and CO 361/Mum/2006.

“Whether the provision of Section 234D of Income Tax Act, 1961, would have retrospective application with regard to the refunds made prior to 01/06/2003?”

2. During the course of hearing learned senior counsel appearing for the Respondent Mr. Pardiwala has pointed out that the substantial question of law involved in the present appeal has already been decided by this Court in the case of Commissioner of Income Tax-10 Vs. Indian Oil Corpn. Ltd¹ wherein the question has been answered against the assessee and in favour of the Revenue.

3. On perusal of the decision rendered in the case of Indian Oil Corporation Limited (supra), we find ourselves in agreement with the submission of Mr. Pardiwalla. If that be so, there would be no necessity for this Court to enter into a fresh process of adjudication in this case so as to answer the substantial question of law framed in the present appeal. Consequently, the grounds urged by the revenue in the memo of Appeal would also stand decided in favour of the Revenue and against the assessee.

4. In the result, the appeal succeeds and same is allowed. The impugned judgment and order dated 26th September, 2008 passed by the Income Tax Appellate Tribunal in ITXA No. 4182 and CO No. 361/Mum/2006 for Assessment Year 2002–03 is hereby set aside. There would be no order as to costs.

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1 (2012) 25 taxmann.com 284 (Bom.)