The Gujarat High Court has held that Oil and Natural Gas Corporation Ltd. (ONGC) is entitled to interest at 6% per annum on the delayed refund arising under the Direct Tax Vivad se Vishwas Act, 2020, from 1 August 2021 until the date on which the refund was actually credited to the assessee. The Court further directed that the order be implemented within six weeks, failing which the amount would carry further interest at 9% per annum.
Case Details
Case: Oil and Natural Gas Corporation Ltd. (ONGC) v. Income Tax Officer, TDS Circle, TDS, Vadodara & Anr.
Court: High Court of Gujarat at Ahmedabad
Coram: Justice A.S. Supehia and Justice Vaibhavi D. Nanavati
Case Nos.: R/Special Civil Application Nos. 6494, 6497, 6538 and 6542 of 2026
Date of Judgment: 19 August 2026
Neutral Citation: 2026:GUJHC:54314-DB
The group of petitions concerned ONGC’s claim for interest on refunds that were released after substantial delay following settlement under the Direct Tax Vivad se Vishwas Act, 2020. Form 5 had been issued on 24 May 2021. Although the refund order was ultimately issued on 7 February 2024, the amount was credited to ONGC only on 2 March 2024. The Revenue had granted interest only from 1 July 2022 to 7 February 2024.
Issue Before the High Court
The principal issue was the date from which interest on the delayed Vivad se Vishwas refund should be calculated. ONGC contended that interest should run from 1 August 2021, relying upon Clause 9 of the CBDT Central Action Plan 2021–22, whereas the Revenue sought to justify computation from the date following the consequential order giving effect to Form 5.
Clause 9 of the Central Action Plan required jurisdictional Assessing Officers to pass consequential orders and reduce demands or issue refunds by 31 July 2021 in cases where Form 5 had been issued up to 30 June 2021. As ONGC’s Form 5 was issued on 24 May 2021, the Court held that the Revenue could not disregard the timeline prescribed by its own Central Action Plan.
Section 153 Limitation Not Applicable to Vivad se Vishwas Consequential Order
The Revenue argued that the limitation prescribed under Section 153 of the Income Tax Act, 1961 could govern the passing of the consequential order after issuance of Form 5.
The High Court rejected this contention. It observed that neither CBDT Circular No. 03 of 2021 dated 4 March 2021 nor the Central Action Plan referred to Section 153 as prescribing the time limit for such consequential orders. The Court therefore declined to import the Section 153 limitation into proceedings under the Vivad se Vishwas Act.
The Court also noted that Section 5(2) of the Vivad se Vishwas Act and Rule 7 of the Vivad se Vishwas Rules conclude with the issuance of Form 5 and do not themselves contemplate a further consequential order. The requirement for such an order was introduced administratively through the CBDT circular and action plan.
Revenue Cannot Disown CBDT Central Action Plan
A significant aspect of the judgment is the Court’s refusal to permit the Revenue to disregard Clause 9 of the CBDT Central Action Plan 2021–22.
The High Court observed that the Vivad se Vishwas Act is a special enactment intended to confer settlement benefits on taxpayers. Where the CBDT had itself prescribed that consequential orders and refunds in cases involving Form 5 issued up to 30 June 2021 should be completed by 31 July 2021, that administrative direction could not subsequently be ignored by the Department.
Interest Is Compensation for Retention of Taxpayer’s Money
The Court relied upon the principle recognised by the Supreme Court in Union of India v. Tata Chemicals Ltd. that interest on refund represents compensation for the use and retention of money that the Government was not entitled to retain.
The Gujarat High Court reiterated that once money belonging to the taxpayer is retained without lawful justification, the obligation to refund carries with it the corresponding right to interest.
High Court’s Direction
The Court directed the respondents to grant ONGC interest at 6% per annum from 1 August 2021 until 2 March 2024, being the date on which the refund was actually credited.
The direction must be implemented within six weeks from receipt of the writ of the order. Importantly, the Court further clarified that if payment is not made within the prescribed period, the amount would carry further interest at 9% per annum, recoverable from the erring officer or officers. The writ petitions were accordingly partly allowed.
Why This Judgment Matters
The ruling is significant for taxpayers awaiting refunds pursuant to settlement under the Direct Tax Vivad se Vishwas Act. It confirms that administrative delay in passing consequential orders cannot postpone the taxpayer’s entitlement to interest where the CBDT itself has prescribed a timeline for giving effect to Form 5. It also reinforces the broader principle that interest on delayed refunds is compensatory in nature and follows from the Government’s retention of money beyond the period lawfully permissible.
The judgment will be particularly relevant to taxpayers, advocates, Chartered Accountants and corporate tax teams dealing with delayed Vivad se Vishwas refunds, Section 244A interest claims and consequential orders passed pursuant to Form 5.