Delhi HC Orders Rs.53 Crore TDS Refund with Interest Without Form 26B

Vodafone Idea Limited Vs ACIT (Delhi High Court)

Summary: The Delhi High Court allowed the connected writ petitions filed by Vodafone Idea Limited, seeking release of pending TDS refunds with applicable interest for Assessment Years 2003-04, 2008-09 to 2013-14. The petitions stated that the refunds had remained unpaid for about two years even after orders of the Income Tax Appellate Tribunal and subsequent orders passed by the Assessing Officer giving effect to those appellate decisions.

For AY 2012-13, the Tribunal’s order dated 05.06.2024 was followed by an appeal-effect order dated 30.10.2024, with refund quantified by the assessee at Rs.11,06,37,172; the Form 26B applications dated 25.04.2025 were rejected. For AY 2013-14, the Tribunal’s order dated 30.04.2024 was followed by an appeal-effect order dated 14.10.2024, with refund quantified at Rs.7,57,50,048; the Form 26B application dated 01.02.2025 was rejected. For AYs 2003-04 and 2008-09 to 2011-12, the relevant Tribunal orders were dated 26.11.2024 and 03.02.2025, followed by an appeal-effect order dated 15.05.2026, with refund quantified at Rs.34,45,69,250. The total amount found payable by the Assessing Officer was Rs.53,09,56,470.

The petitioner argued that Section 200A, Section 201, Rule 31A and Form 26B address the processing of TDS statements and refunds arising from excess or incorrect deduction/deposit. According to the petitioner, they do not govern a refund that crystallises after an assessment under Section 201 or after an appellate order.

The respondents relied on departmental practice and the Standard Operating Procedure dated 23.03.2023 issued by the Centralized Processing Cell (TDS), contending that Form 26B was sought whenever TDS refunds were issued, including refunds consequent upon court or appellate orders. They also relied on the SOP’s treatment of outstanding demands against sister associated TANs. The respondents stated that about Rs.924,57,20,992 was outstanding against the petitioner’s PAN and sister TANs, of which Rs.913,66,12,715 was stayed and Rs.10,91,08,277 was not subject to stay. The petitioner disputed that figure and asserted that only Rs.27,63,141 was outstanding. The Court expressly left that factual dispute to the authorities.

The Court examined the statutory scheme and held that Sections 200A and 201 operate in entirely different fields. It held that Section 201 deals with assessment of TDS, whereas Section 200A deals with adjustment of TDS before assessment at the CPC level; Rule 31A provides the procedure for that adjustment and Form 26B facilitates it. Once a competent Assessing Officer has made an assessment under Section 201 and/or an appellate authority has passed an order giving rise to a refund, the assessee has a vested and crystallised right to the refund with applicable interest, subject to the Department’s right to challenge the order in accordance with law.

The Court further held that, after an assessment under Section 201, Rule 31A does not apply and the AO or CPC cannot compel an assessee to furnish Form 26B. The refund arising after giving effect to an appellate order must therefore be paid with applicable interest, subject to withholding or adjustment by a legally passed order under Section 245. In the present case, no such order under Section 245 had been shown. The Court therefore held the withholding of the refund on the basis of outstanding demands against the petitioner’s PAN and sister TANs to be untenable in law, arbitrary and violative of Articles 14, 19(1)(g) and 300A of the Constitution.

The writ petitions were allowed. The respondents were directed to pay Rs.53,09,56,470 to the petitioner with applicable interest under Sections 244A and 244A(1A) on or before 30.09.2026. If the amount was not credited by that date, the entire amount would carry additional interest at 1% per month over and above statutory interest. All pending applications were also disposed of.

FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT

1. By way of the present petitions preferred under Articles 226 & 227 of the Constitution of India, the petitioner/assessee has sought directions to the respondent/Department to issue pending refunds along with applicable interest under Section 244A(1) & 244A(1A) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act of 1961’) pertaining to Assessment Years 2003-04, 2008-09 to 2013-14 citing that the refund is pending for a period of about two years.

2. Mr. Sachit Jolly, learned senior counsel for the petitioner, informed that vide orders dated 30.04.2024, 05.06.2024, 26.11.2024 and 03.02.2025, the Income Tax Appellate Tribunal (hereinafter referred to as ‘the Tribunal’) had directed the Assessing Officer (hereinafter referred to as ‘AO’) to refund and in furtherance whereof, even the AO had passed the Appeal Effect Order on 14.10.2024, 30.10.2024 and 15.05.2026 but the amount has not been paid till today.

3. To give a bird’s eye view of the relevant facts, the details of the orders and the amount due to be refunded to the petitioner are given hereunder:

4. Mr. Sachit Jolly, learned senior counsel for the petitioner, submitted that the petitioner’s appeals were allowed by the Tribunal vide orders dated 30.04.2024 (AY 2013-14), 05.06.2024 (AY 2012-13), 26.11.2024 & 03.02.2025 (AYs 2003-04, 2008-09, 2009-10, 2010-11 & 2011-12). In furtherance thereof, the AO passed orders giving appeal effect of such orders on 30.10.2024, 14.10.2024 and 15.05.2026 and had found a total sum of Rs.53,09,56,470/- payable to the petitioner and in spite of this, when it came to making payment of the amount, the respondents insisted upon filing of Form 26B. He added that though the petitioner was of the view that the same

5. cannot be insisted upon and also knew it fully well that different High Courts have held in its own cases that such Form is not necessary, it did file the same in order to expedite the process of refund.

6. Learned senior counsel further submitted that when the petitioner filed such Form, the respondents rejected petitioner’s Form citing that there are certain dues qua petitioner’s PAN and sister TANs to the tune of Rs.924,57,20,992/-, whereas most of such demand has been stayed by competent authorities/Courts.

7. A counter affidavit/reply has been filed to the writ petitions in which the respondents have fairly admitted the fact that out of the demand of Rs.924,57,20,992/-, an amount of Rs.913,66,12,715/- has been stayed by various Authorities/Courts and only a sum of Rs.10,91,08,277/- is the amount qua which the petitioner does not have stay operating in its favour.

8. A rejoinder has also been filed by the petitioner inter alia asserting that the figure of Rs.10,91,08,277/- alleged to be outstanding against the petitioner is factually incorrect and as a matter of fact only a sum of Rs.27,63,141/- is outstanding against the petitioner.

9. Be that as it may. We do not propose to go into such factual dispute and leave for the authorities to decide.

10. Mr. Sachit Jolly, learned senior counsel for the petitioner, argued that the petitioner/company is an Indian company in which approximately 50% of shares are held by the Government of India. He submitted that the petitioner is in dire need of cash, because of the capital intensive nature of the business; he raised a grievance that it is because of the approach of the respondents that a huge amount which the petitioner has deducted, is lying with the respondents and in spite of various orders by the Authorities, it is not getting refund. He submitted that the petitioner had to file writ petitions in different High Courts and even before this Court.

11. Mr. Jolly, learned senior counsel argued that the respondents’ action of insisting upon the petitioner to furnish Form 26B is absolutely illegal and arbitrary. He took the Court through scheme of Sections 200A and 201 of the Act of 1961, highlighted that Section 200A of the Act of 1961, Rule 31A of the Income Tax Rules, 1962 (hereinafter referred to as ‘the Rules of 1962’) and Form 26B are meant for the purposes of and dealing with the cases where an assessee or deductor asks for refund of the amount which has been wrongly or inadvertently deducted in excess or incorrect amount has been deducted/deposited.

12. However, when an assessment has been made and an amount is found refundable after the assessment has been done or in pursuance of the order of the Appellate Authorities or the higher Authorities, then neither the provisions of Section 200A are applicable nor any question of applicability of Form 26B arises. He, therefore, argued that the respondents’ action of rejecting petitioner’s Form 26B and withholding the refund for the reason cited that there is outstanding demand on petitioner’s PAN and sister TAN, is illegal and such order is liable to be quashed.

13. Mr. Indruj Singh Rai, learned senior standing counsel for the respondents, on the other hand, argued that if the provisions of the statute viz Section 200A of the Act of 1961, Rule 31A of the Rules of 1962 and Form 26B are read, maybe it looks like that Form 26B does not apply to the cases likes the one in hands but it has been the consistent practice of the Department and all the Assessing Authorities throughout the country that whenever a refund of Tax Deducted at Source (TDS) is given, even in furtherance of the orders of the Court or of the Appellate Authority, an assessee is asked to furnish Form 26B. He invited Court’s attention towards the Standard Operating Procedure dated 23.03.2023 issued by the Centralized Processing Cell (TDS) (hereinafter referred to as ‘SOP’), more particularly, towards clause (v) of paragraph no.2.1.2, to contend that since there is an outstanding demand against sister associated TANs of the deductor/assessee, the request of refund could not be approved.

14. He submitted that the respondent no.1/AO, feeling bound by the SOP and the stipulations made thereunder, did not process petitioner’s request, though she tried to get clarifications from higher officers. He submitted that since there has been an outstanding demand of about Rs.10 crores, the respondent no.1/AO was justified in not issuing refund to the petitioner, as provided in the SOP.

15. In rejoinder, Mr. Sachit Jolly, learned senior counsel for the petitioner, submitted that the argument in relation to the SOP and the applicability of such SOP is equally out of question as is the applicability of Form 26B. He read the opening paragraph of the SOP, which is reproduced hereunder, and submitted that it did not apply to Section 201 of the Act of 1961 and applies only to cases covered by Section 200A of the Act of 1961.

“Prior to insertion of section 200A in the Income Tax Act, 1961 (“the Act”), by the Finance (No. 2) Act, 2009, there was no express provision in the Act for processing TDS statement filed by the deductor under section 200(3). Consequently, there was no formal mechanism in the Act for granting of refund claimed, if any, in the TDS statement filed. However, for mitigating genuine hardship of the deductor, the Board issued

Circulars from time to time, the latest circular on the subject being Circular No. 2/2011 dated 27.04.2011 detailing the procedure for granting of refund of TDS on payments made to residents and Circular No. 7/2007 dated 23.10.2007 detailing the procedure for granting of refund of TDS on payments made to non-residents.”

emphasis supplied

16. Heard learned counsel for the parties.

17. The case in hands portrays a grim picture of the state of affairs prevailing in the Department so far as issues relating to refund is concerned. The amount relating to the petitioner for AYs 2003-04, 2008-09, 2009-10, 2010-11, 2011-12, 2012-13 and 2013-14 is still lying with the Department after 10 years of legal battle which it had won before the Tribunal in June 2024. The petitioner’s plight does not end here. After having won the legal battle before the Tribunal, though the AO found an amount of Rs.53,09,56,470/- refundable to the petitioner in October 2024 & May 2026 but has still not remitted the amount. This time the AO took refuge of Form 26B and purported outstanding demand of petitioner’s sister TANs to the tune of Rs.10,91,08,277/-.

18. Having gone through the scheme of the Act of 1961, more particularly, Sections 200A and 201 of the Act of 1961, Rule 31A of the Rules of 1962 and Form 26B, we have no hesitation in holding that Sections 200A & 201 of the Act of 1961 operate on entirely different fields and spheres. Section 201 of the Act of 1961 is a provision which deals with the assessment of TDS while Section 200A of the Act of 1961 deals with adjustment of TDS prior to assessment at the level of CPC. Rule 31A of the Rules of 1962 is a procedure provided for such adjustment and Form 26B is a form meant to facilitate such adjustment.

19. Once the assessment by a competent AO has been made under Section 201 of the Act of 1961 and/or any Appellate Authority passes an order and the refund arises or emanates therefrom, it becomes a vested and crystallised right of an assessee to get the refund, along with applicable interest, subject of course to the Department’s right to challenge such order in accordance with law. Such order is neither subservient to Section 200A of the Act of 1961 nor to Rule 31A of the Rules of 1962.

20. We hold it very categorically that once an assessment under Section 201 of the Act of 1961 has been made, neither Rule 31A of the Rules of 1962 applies nor can the AO or the CPC compel any assessee to furnish Form 26B and therefore, the amount found refundable after giving effect to the Appellate Authority’s order has to be paid along with applicable interest, subject of course to withholding or adjustment by way of legally passed order under Section 245 of the Act of 1961.

21. Unless any order under Section 245 of the Act of 1961 is passed, the AO or the CPC cannot withhold any amount of an assessee once the Appellate Authority or the AO finds an amount to be refundable after passing of an order under Section 201 of the Act of 1961 or pursuant to an appeal arising therefrom.

22. In the instant case, the respondents have failed to show any order passed by the competent Authority withholding or adjusting any refund having been passed in exercise of powers under Section 245 of the Act of 1961. Such being the position, the plea taken by the respondents that the refund has not been issued because of the pending outstanding demand qua petitioner’s PAN and sister TANs is clearly untenable in law, arbitrary and violative of Articles 14, 19(1)(g) & 300A of the Constitution of India. The writ petitions are, therefore, allowed.

23. The respondents are directed to pay to the petitioner the amount of Rs.53,09,56,470/- along with applicable interest under Sections 244A & 244A(1A) of the Act of 1961 on or before 30.09.2026.

24. In case the amount is not credited in petitioner’s account by 30.09.2026, the entire amount shall carry interest @1% per month over and above statutory interest.

25. It is a fit case for imposition of exemplary cost, but we make the case easy.

26. All pending applications are also disposed of.