United Spirits Limited Vs DCIT (Karnataka High Court)
Karnataka HC directs immediate refund of ₹60.45 crore to United Spirits – Adjustment against illusory demand held illegal
United Spirits Ltd approached the High Court seeking a direction to the Department to refund ₹60,45,57,292/- pursuant to an order dated 27.06.2024 passed by the DCIT giving effect to earlier directions of Court.
The matter had its genesis in W.P. Nos. 13953/2020 & connected cases, where a Co-ordinate Bench of the Karnataka High Court (order dated 17.08.2023) had held that the AO’s proceedings to give effect to ITAT’s order dated 31.03.2015 stood time-barred beyond 31.03.2017, in view of substituted Section 153(7) introduced by Finance Act 2016. It was observed that once the timeline for giving effect to Tribunal’s directions expired, the Assessee’s claims for bad debts & 14A disallowance stood restored as per CIT vs Shelly Products (2003) 5 SCC 461, & the Department was bound to refund the excess tax paid along with interest.
Pursuant to those directions, the Department was to process & grant refund based on representations dated 29.10.2020 & 29.11.2020. However, instead of releasing the refund, CPC adjusted the amount against an alleged “subsisting demand” for A.Y. 2013-14.
Assessee Petitioner argued that no such demand existed-either it stood already quashed or had become time-barred as the Tribunal’s liberty for fresh consideration was never exercised within the permissible period. Thus, the alleged demand was purely illusory, & adjustment of refund was unsustainable.
