The Delhi High Court has directed the Income Tax Department to refund more than ?53 crore to Vodafone Idea Limited, holding that a refund arising from an assessment or an appellate order cannot be withheld merely because the taxpayer has not furnished Form 26B.
A Division Bench of Justice Dinesh Mehta and Justice Rajneesh Kumar Gupta directed the Revenue to pay Vodafone Idea ?53,09,56,470 along with applicable interest by September 30, 2026.
The Court further ordered that if the amount is not credited by that date, the entire refund would carry additional interest at 1 per cent per month over and above the statutory interest.
The dispute concerned tax refunds relating to assessment years 2003-04 and 2008-09 to 2013-14. Vodafone Idea had succeeded before the Income Tax Appellate Tribunal in a series of orders passed between April 2024 and February 2025.
Pursuant to those orders, the Assessing Officer passed appeal-effect orders and quantified a total refund of ?53.09 crore. Despite this, the amount had not been released.
The company approached the High Court after the Revenue insisted that it submit Form 26B. Vodafone Idea eventually furnished the forms for two assessment years, but the applications were rejected on the ground that outstanding demands existed against its PAN and the TANs of sister concerns.
The total demand cited by the Department was about ?924.57 crore. However, the Revenue acknowledged that ?913.66 crore of this amount had already been stayed by various authorities and courts, leaving approximately ?10.91 crore without a stay.
Vodafone Idea disputed even this figure, claiming that only ?27.63 lakh was actually outstanding against it. The High Court, however, left that factual dispute to the tax authorities.
The central question before the Court was whether the Department could insist on Form 26B and rely on the mechanism under Section 200A of the Income Tax Act and Rule 31A of the Income Tax Rules to delay a refund that had arisen after an assessment under Section 201 or an appellate order.
The Court answered the question against the Revenue. It held that Sections 200A and 201 operate in different fields. While Section 201 concerns assessment of TDS, Section 200A deals with adjustment of TDS statements before assessment at the Centralised Processing Cell level. Rule 31A and Form 26B relate to the latter mechanism.
The Bench said that once a competent Assessing Officer makes an assessment under Section 201, or an appellate authority passes an order resulting in a refund, the taxpayer acquires a “vested and crystallised right” to receive the refund along with applicable interest.
Such a refund, the Court held, is not subordinate to Section 200A or Rule 31A. Consequently, once an assessment under Section 201 has been completed, neither the Assessing Officer nor the CPC can compel the taxpayer to furnish Form 26B before releasing an amount found refundable pursuant to an appellate order.
The Court also rejected the Revenue's reliance on outstanding demands. It noted that the Department had failed to produce any order under Section 245 authorising the withholding or adjustment of Vodafone Idea's refund. In the absence of such an order, the Assessing Officer or CPC could not withhold a refund merely because an outstanding demand existed against the taxpayer's PAN or the TANs of its sister concerns, the Court held.
The Bench criticised the prolonged delay in releasing the money, observing that the case presented a “grim picture” of the state of affairs concerning refunds in the tax department. The Court noted that the amounts relating to the relevant assessment years had remained with the Department even after Vodafone Idea had won its legal battle before the Tribunal.
Allowing the writ petitions, the Court directed the Revenue to release the ?53.09 crore refund with statutory interest under Sections 244A and 244A(1A) by September 30. Failure to do so would attract the additional 1 per cent monthly interest ordered by the Court.
Manish Garg, Partner-Tax, AKM Global, said the Delhi High Court’s ruling draws an important distinction between refunds arising from TDS statement processing under Section 200A read with Rule 31A and Form 26B, and refunds that crystallise following an assessment under Section 201 or an appellate order.
The ruling is particularly significant for legacy TDS disputes and appellate refunds, where taxpayers could otherwise face fresh litigation to recover amounts already held refundable.
However, Garg cautioned that the judgment does not take away the Department’s lawful power to withhold or adjust refunds under Section 245.
Such withholding must be based on a valid order under the provision; an administrative practice, SOP, or the mere existence of a demand against the assessee or a sister concern’s TAN cannot, by itself, justify withholding a crystallised refund, he said.
Please click here to view the full story on Business Standard.