Justice J.B. Pardiwala, Justice R. Mahadevan, Supreme Court
Supreme Court: Govt Can’t Shrug Off Its Obligation To Reimburse Tax Deductors With Accrued Interest For Period Of Undue Retention Of Lawful Monies
|The Supreme Court emphasised that when a person is deprived of the use of his money to which he is legitimately entitled, he has a right to be compensated for the same in the form of interest or compensation.
The Supreme Court reiterated that the Government cannot shrug off its obligation to reimburse the tax deductors with accrued interest for the period of undue retention of lawful monies.
The Court reiterated thus in a Civil Appeal preferred against the Judgment of the Delhi High Court by which the Appeal challenging the Single Judge’s Judgment was dismissed.
The two-Judge Bench of Justice J.B. Pardiwala and Justice R. Mahadevan observed, “No discrimination can be shown between the assessee and Revenue in paying interest on the refund of tax. Money received and retained without right, carries with it the right to interest. There being no express statutory provision for payment of interest on the refund of excess amount/tax collected by the Revenue, the Government cannot shrug off its apparent obligation to reimburse the deductors lawful monies with accrued interest for the period of undue retention of such monies. Obligation to refund money received and retained without right implies and carries with in the right to interest.”
The Bench emphasised that when a person is deprived of the use of his money to which he is legitimately entitled, he has a right to be compensated for the deprivation which may be called interest or compensation.
“Interest is paid for the deprivation of the use of money in general terms which has returned or compensation for the use or retention by a person of a sum of money belonging to other”, it added.
Advocate Abhishek Puri appeared on behalf of the Appellants while Advocate Jyoti Mehandiratta appeared on behalf of the Respondents.
Facts of the Case
The Appellants were desirous of purchasing an immovable property in New Delhi and for that purpose, they purchased an e-stamp paper in 2016, valued at Rs. 28,10,000/-. The money for the same was paid from the joint bank account of the Appellants being husband and wife respectively. Since there was some delay in closing the loan transaction, the execution of the Sale Deed was delayed. This delay proved to be fatal and the Appellants were told by the broker that the e-stamp paper had been misplaced. Resultantly, they filed a Complaint with the Crime Branch, Delhi Police and as a follow-up action, they got public notices issued in two newspapers.
Since the Appellants were desirous of taking the sale transaction in respect of the property forward, they were left with no choice but to purchase a fresh e-stamp paper. The money for this was also paid from their joint account and then the Sale Deed was executed. Thereafter, they filed an Application with the Sub-Divisional Magistrate, Collector of Stamps for refund of stamp duty on account of its loss. However, the same was rejected and hence, they approached the High Court. The Single Judge partly allowed their Writ Petition and directed the Respondents to refund Rs. 28,10,000/- i.e., the principal amount but not the interest on the same. Their Letters Patent Appeal was dismissed and therefore, they were before the Apex Court.
Reasoning
The Supreme Court after hearing the contentions of the counsel, noted, “If on facts of a case, the doctrine of restitution is attracted, interest should follow. Restitution in its etymological sense means restoring to a party on the modification, variation or reversal of a decree or order what has been lost to him in execution of decree or order of the Court or in direct consequence of a decree or order. The term “restitution” is used in three senses, firstly, return or restoration of some specific thing to its rightful owner or status, secondly, the compensation for benefits derived from wrong done to another and, thirdly, compensation or reparation for the loss caused to another.”
The Court said that the Respondents could not have declined to refund the amount and that the retention of the said amount was for a long time and further the Appellants were left with no other option but to approach the High Court.
“… we are of the view that the appellants are entitled to have interest on Rs.28,10,000/-”, it said.
The Court, therefore, directed the Respondents to pay an amount of Rs. 4,35,968/- towards interest within two months.
Accordingly, the Apex Court disposed of the Appeal.
Cause Title- Dr. Poornima Advani & Anr. v. Government of NCT & Anr. (Neutral Citation: 2025 INSC 262)