Delhi High Court Quashes 2005 Order Denying Additional Tax Refund Interest To Mitsui Engineering, Cites Sandvik Asia

The Delhi High Court has allowed the writ petition filed by a Japan-based maritime engineering and logistics company, seeking additional interest on a long-pending income tax refund, in light of the Supreme Court's ruling in Sandvik Asia Ltd. v. Commissioner of Income Tax.

A Division Bench of Justices Dinesh Mehta and Vinod Kumar set aside a 2005 order passed by the Director of Income Tax (International Taxation), which had rejected the petitioner's application under Section 154 of the Income Tax Act seeking additional interest under Section 244(1A) for Assessment Year 1988–89.

The High Court noted that the impugned order had relied on a Bombay High Court judgment in Sandvik Asia, which was subsequently reversed by the Supreme Court in 2006.

In Sandvik Asia, the taxpayer had to wait 12–17 years for refunds and statutory interest.

The Supreme Court had held that where the Revenue wrongfully delays payment of amounts lawfully due to an assessee, including refunds, the assessee is entitled to compensation in the form of interest.

In view of this position, the High Court held that the rejection of the interest claim could not be sustained.

Accordingly, the Court directed the competent authority to pass a fresh order within three months failing which, additional amount payable shall carry interest at the rate of 1% per annum from June 1, 2026.

For Petitioner: Advocate Rajiv Tyagi

For Respondent: Siddhartha Sinha, SSC with Ms. Easha Gurung, JSC.