Delhi HC orders Rs 53-crore tax refund to Vodafone Idea, pulls up I-T Department

The Delhi High Court has directed the Income Tax Department to release more than Rs 53 crore in refunds to Vodafone Idea, strongly criticising the authorities for continuing to withhold the money despite orders determining that it was payable to the telecom company.

A Division Bench of Justices Dinesh Mehta and Rajneesh Kumar Gupta said the case reflected a “grim picture” of the manner in which refund-related matters were being handled by the department. The court ordered payment of Rs 53.09 crore, along with applicable statutory interest, by September 30. The Bench imposed a financial consequence for any further delay. If the refund is not credited to Vodafone Idea by the deadline, the amount will attract additional interest of 1 per cent per month over and above the statutory interest.

Refund followed tribunal orders

The dispute related to assessment years 2003-04 and 2008-09 to 2013-14. Vodafone Idea had succeeded in proceedings before the Income Tax Appellate Tribunal (ITAT), which passed orders in its favour between April 2024 and February 2025.

Following the tribunal's decisions, the assessing officer passed consequential orders and calculated that more than Rs 53 crore was refundable to the telecom operator. The amount, however, was not released.

The Income Tax Department sought submission of Form 26B and also pointed to outstanding tax demands linked to Vodafone Idea's Permanent Account Number and associated Tax Deduction and Collection Account Numbers.

The department cited demands totalling Rs 924.57 crore. During the proceedings, however, it acknowledged that demands amounting to Rs 913.66 crore had already been stayed by courts or competent authorities. It maintained that around Rs 10.91 crore remained unstayed, while Vodafone Idea disputed this and claimed that the actual outstanding amount was only Rs 27.63 lakh.

The High Court did not adjudicate on the conflicting figures, finding that the issue did not justify withholding the refund in the manner adopted by the department.

Form 26B demand rejected

The court rejected the department's insistence on Form 26B, drawing a distinction between procedures governing the processing of tax deducted at source and refunds arising after assessment or appellate proceedings.

It held that once a competent assessing officer completes an assessment under Section 201 of the Income Tax Act, or an appellate authority passes an order resulting in a refund, the taxpayer acquires a crystallised right to receive that amount along with applicable interest.

The court held that the authorities could not subsequently compel the taxpayer to furnish Form 26B as a condition for releasing such a refund.

It also rejected the department's reliance on its standard operating procedure to justify retaining the money.

Statutory order necessary

The Bench said an existing tax demand could be adjusted against a refund only through the procedure prescribed under Section 245 of the Income Tax Act. Since no valid adjustment order had been passed in Vodafone Idea's case, withholding the refund on that basis could not be sustained.

The court found the department's action arbitrary and legally untenable and held that it violated constitutional protections.

While observing that the circumstances could have justified exemplary costs against the department, the Bench ultimately chose not to impose them.

The ruling leaves the Income Tax Department with a September 30 deadline to release the Rs 53.09-crore refund with statutory interest, failing which the additional monthly interest directed by the High Court will become applicable.