SC relief: Voda-Idea to get Rs 733 crore out of Rs 4750 crore tax refund claim - Synopsis
Dilpreet Singh 15 May 2020

The Supreme Court granted a relief of Rs 733 Crore tax refund to Vodafone-Idea, who is suffering under extreme financial stress. The income-Tax department was ordered by the court to refund the total within 4 weeks.

The relief approved by the apex court, though, fell well short of Vodafone's claims for tax refund for more than Rs 4750 Crores.

A bench headed by Justice UU Lalit upheld the I-T Department's conduct not to grant refunds as a legitimate exercise of authority, required to scrutinize Vodafone's accounts and returns in more depth.

The court later dismissed Vodafone 's appeal to request refunds for the 2015-16 to 2017-18 assessment years.

The reimbursement of 733 crore was approved by the SC for the assessment year 2014-15, for which the assessment had been finalized and the refund had been certified.

However, the Supreme Court noted that the refund would be subjected to any proceedings initiated by the Department of Revenue. The I-T Department claimed that it had the freedom to take an action under section 245 to adjust the refund of 733 crore against an outstanding claim of 582 crore. The petition for Rs 582 crore is presently under appeal and has remained with the Mumbai Bench of the Income Tax Appellate Tribunal (ITAT).

The apex court heard Vodafone's petition in law, which claimed delays in processing and granting tax refunds for the evaluation year 2014-15 to 2017-18. Vodafone demanded tax refunds for all 4 years of assessment.

In December 2018, following a rejection from the Delhi High Court, Vodafone appealed to the Supreme Court, arguing before the apex court that the tax department had behaved arbitrarily and had intentionally postponed the processing of returns and the issuance of refunds.

Vodafone claimed that, according to section 143(1) of the I-T Act, the returns reported had to be processed within a year, which the department did not do. Vodafone also reported that no additional analysis under Sec 143(1D) had been insinuated. Vodafone then reserved the right to demand a refund of the tax.

Nevertheless, the court did not approve. The SC held that, once an additional review of Vodafone's accounts has been initiated pursuant to Section 143(2), the tax department is not obligated to issue any refunds until such time as the review is completed. The SC also held that no right of refund may be asserted until the investigation under Section 143(2) has been concluded.

The Court also explained that a notice to Vodafone under Section 143(2) for the commencement of a the process was the only intimation that the department was needed to give.

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