Income Tax - Payment of interest on refund of excess TDS - CBDT Clarifies
THE issue of eligibility for interest on refund of excess TDS to a tax deductor has been a subject matter of controversy and litigation. The Supreme Court of India in the case of Tata Chemical Limited (), held that, "Refund due and payable to the assessee is debt-owed and payable by the Revenue. The Government, there being no express statutory provision for payment of interest on the refund of excess amount/tax collected by the Revenue, cannot shrug off its apparent obligation to reimburse the deductors lawful monies with the accrued interest for the period of undue retention of such monies. The State having received the money without right, and having retained and used it, is bound to make the party good, just as an individual would be under like circumstances. The obligation to refund money received and retained without right implies and carries with it the right to interest."
CBDT clarifies that "in view of the above judgment of the Apex Court it is settled that if a resident deductor is entitled for the refund of tax deposited under Section 195 of the Act, then it has to be refunded with interest under section 244A of the Act, from the date of payment of such tax."
Accordingly, Board advises that no appeals may henceforth be filed on this ground by the officers of the department and appeals already filed on this issue may not be pressed upon.
CBDT Circular No. 11/2016, Dated: April 26, 2016