Danieli India Limited Vs Union of India (Calcutta High Court)
The Calcutta High Court, in the case of Danieli India Limited Vs Union of India, addressed the issue of whether a taxpayer is automatically entitled to interest under Section 244A of the Income Tax Act, 1961, on a refund amount that was released pursuant to a specific direction by the High Court, particularly when the underlying tax demand is still subject to appeal.
Background and Issue
The petitioner, Danieli India Limited, was entitled to refunds for the assessment years 2010-11 and 2017-18. However, the Income Tax Department adjusted this admitted refund amount to recover outstanding demands for assessment years 2011-12, 2012-13, and 2013-14, against which appeals were pending before the CIT (Appeals).
In a prior writ petition (WPO/2294/2022), a Coordinate Bench of the Calcutta High Court, relying on the precedent set in Graphite India Ltd. vs. Deputy Commissioner of Income Tax & Ors., held that the Income Tax Authority’s action of recovering an amount in excess of 20% of the demand (where appeals were pending) by way of adjustment was arbitrary and unsustainable. Consequently, the Court, by order dated September 1, 2023, directed the Department to refund the excess amount recovered, subject to verification, within four weeks. This earlier order, however, did not specifically direct the payment of interest.
