Sun Pharma Eligible For Refund Of Excess TDS, Delhi High Court Declares CBDT Para. Citing Limitation As Ultra Vires

Date:

The Delhi High Court has held that Sun Pharma is eligible for refund of excess TDS under Section 195 for FY 2010-11 to 2012-13.

The bench of Justice Yashwant Varma and Justice Ravinder Dudeja has observed that while allowing the petition filed by Sun Pharmaceutical Industries declared the paragraph 9 of the CBDT Circular No. 07/2007 dated 23 October 2007 which relates to the the limitation for making a claim of refund of excess TDS to be ultra vires the Income Tax Act ineligibility conditions refund of excess TDS.

As per the paragraph 9 of the CBDT Circular No. 07/2007 dated 23 October 2007  the limitation for making a claim of refund under this circular relating to refund of tax deducted at source under section 195 to the person deducting the tax section 239 of the Income Tax 1961 shall be two years from the end of the financial year in which tax is deducted at source. However, all cases for claim of refund under items (c) to (i) of paragraph 2 which were pending before the issue of this circular and where the claim for refund was made after the issuance of Circular No. 790 may also be considered.

The writ petitioner/assessee has challenged the order in terms of which the department has come to reject applications filed by it seeking refund of excess tax wrongly deducted and deposited under Section 195 of the Income Tax Act, 1961.

 The applications themselves pertained to Financial Years 2010-11 to 2012-13. Since the respondent has also held against the petitioner for a perceived delay in the filing of those applications, the petitioners also mount a challenge to Circular No. 07/2007 dated 23 October 2007 issued by the Central Board of Direct Taxes and which had introduced a prescription of limitation for the institution of such refund applications. 

The department has held against the writ petitioner not only on the ground that the applications were barred by time but also on the basis of those applications not being liable to be granted on merits. In consequence to the challenge raised, the petitioners also seek an appropriate direction for refund of the excess tax that had come to be deposited.

The department, while dealing with those applications has firstly alluded to Circular No. 07/2007, and which according to it, had constructed a period of limitation of two years within which an application for excess tax deposited could have been preferred. The applications would be barred by paragraph 9 of the circular. It has also questioned the assertion of the tax having been deducted in excess on the ground that the remittance made would not fall within the ambit of the exception which is carved out by clause (b) of Section 9(1)(v) of the Income Tax Act holding that the same would not fall within the scope of interest paid on monies borrowed and used for the purposes of a business carried on outside India nor fall under the expression “for the purposes of making of earning any income from any source outside India”.

On 24 March 2015, RLL merged with the petitioner in terms of a Scheme of Arrangement with an effective date of 01 April 2014. The petitioner acting as the successor-in-interest of RLL, is stated to have addressed various reminders in respect of the applications for refund which were pending. Those refund applications have ultimately come to be rejected in terms of the order. 

The petitioner submitted that assailed the findings rendered by the respondent of the applications for refund being barred by limitation and submitted that the Act itself stipulates no period or terminal point within which a claim for refund of excess TDS may be instituted. 

The petitioner contended that Circular No. 07/2007 is clearly ultra vires and creates a condition absent any statutory backing. The CBDT could not have, by way of an administrative circular, created or introduced a condition of ineligibility insofar as a claim for refund of excess TDS was concerned.

The court allowed the writ petition and declared paragraph 9 of the CBDT Circular No. 07/2007 dated 23 October 2007 to be ultra vires the Act and hold that the applications for refund were wrongly rejected as being barred by time.

The court quashed the order and consequently declared the petitioner eligible for refund of excess taxes deposited by it under Section 195 for FY 2010-11 to 2012-13.

Case Details

Case Title: Sun Pharmaceutical Industries Versus Income Tax Officer

Case No.: W.P.(C) 8444/2018

Date: 31 January 2025

Counsel For Petitioner: Sr. Adv. Ajay Vohra, with Adv. Rohit Jain, Aniket  Adv. D. Agrawal and  Adv. Abhishek Singhvi

Counsel For Respondent: Adv. Vipul Agrawal and Adv. Sanjay Kumar

Read More: Rule 96ZO Of Central Excise Rules Is Self Contained Scheme And Provisions Of Section 11B Of Central Excise Act Is Not Applicable: CESTAT

Mariya Paliwala
Mariya Paliwalahttps://jurishour.in/
Mariya is the Senior Editor at JurisHour. She has 5+ years of experience on covering tax litigation stories from the Supreme Court, High Courts and various tribunals including CESTAT, ITAT, NCLAT, NCLT, etc. Mariya graduated from MLSU Law College, Udaipur (Raj.) with B.A.LL.B. and also holds an LL.M. She started as a freelance tax reporter in the leading online legal news companies like LiveLaw & Taxscan.

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