Vodafone Idea moves Supreme Court for Rs 4,761-crore tax refund

The Supreme Court on Friday sought response from the income tax department as to why it should not refund around Rs 4,761 crore to Vodafone Idea in respect of returns for assessment years (AYs) 2014-15 to 2017-18.

Stating that such inaction in granting refunds has caused grave financial hardships, Vodafone said that its financial condition is precarious as it has accumulated losses of rS 5,557 crore and debts amounting to Rs 53,000 crore as on March 31, 2017.

A bench led by Justice UU Lalit gave four weeks to the department to respond to the appeal filed by Vodafone challenging the Delhi High Court’s December 14 order that rejected its request for a direction to the income tax department to process the returns of income and issue refunds aggregating to Rs 4,761 crore.

The company said that the HC had relied on a July 23 letter by the department that denied refund to the company and the reason for denial “are superfluous and without any basis”. According to Vodafone, “this letter/order is admittedly beyond limitation, bereft of any cogent reasoning and hence without jurisdiction,” as the time limit for processing of returns and/or passing any order refusing to process the returns for 2014-15 to 2016-17 had elapsed on May 31. Besides, no hearing was given to Vodafone before issuing the letter, the appeal stated, adding that even the mandatory approval of the Principal Commissioner as required under the income tax law is absent.

It further said that such withholding of refunds is contrary to the letter and spirit of Section 143(1) of the Income tax Act and the Citizens Charter, 2014 issued by the CBDT, in terms of which processing of refunds at the earliest and not later than one year from the end of the relevant financial year in which the return has been filed, has been mandatorily prescribed under the Act.

Even if all the additions proposed by the revenue department are made in AY 2014-15 to 2017-18, yet after exclusion of the covered issues and rectifiable/palpable mistakes, it would be entitled to a refund of around Rs 3,500 crore, senior counsel Arvind Dattar argued.

The HC, while rejecting Vodafone’s plea for refund, had said that there was merit in the tax department’s argument that substantial outstanding demand was pending against the company and there was a likelihood of more demands being made after the assessment for the AYs in question were scrutinised.

IDEA Cellular Limited