Shree Renuka Sugars Limited Vs ACIT (Karnataka High Court)
Delay Has a Cost: Karnataka HC Orders Interest on Interest for 35-Month Refund Delay under Vivad Se Vishwas
The Karnataka High Court (Dharwad Bench) held that an assessee is entitled not only to interest on a delayed tax refund but also interest on such interest, where the refund determined under the Direct Tax Vivad Se Vishwas Act, 2020 was released after an inordinate delay.
In this case, the refund of ₹2.60 crore was determined in Form 5 dated 24.02.2021, but was actually credited only on 10.01.2024, resulting in a delay of nearly 35 months. The Court rejected the Revenue’s contention that no interest was payable under the Vivad Se Vishwas scheme and held that once a refund is determined, delay in payment attracts interest as a matter of right.
Relying on the Supreme Court decision in CIT v. H.E.G. Ltd. and the Rajasthan High Court ruling in Dwejesh Acharya, the Court reiterated that interest becomes an integral part of the refund amount, and if such interest is also withheld, the assessee is entitled to interest on that component as well.
Accordingly, the Court issued a writ of mandamus directing the Revenue to pay interest at 6% per annum on the delayed refund from 25.05.2021 till 10.01.2024, along with interest on such interest.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
