Deductor to get interest on TDS refund from date of filing claim and not from date of deposit of TDS

Facts:

a)    The assessee, a steel manufacturing co., entered into an agreement with German company for transfer of technical know-how in order to establish an integrated steel plant.

b)    Assessee was required to make payment to German Co. in three installments after deducting tax at source under Section 195.

c)    Subsequently, since the German company was not able to fulfil its obligations, it agreed to waive the payment of third instalment of technical knowhow fee and treated the payment of first and second instalments as full and final payment against the contract.

d)    The petitioners subsequently filed an application (after 18 months from the date of waiver of third installment by German Company) claiming refund of the amount which was deposited as advance TDS towards the third instalment of the payment which was to be made to the German company.

e)    Though refund was granted to assessee but department denied to grant any interest on such refund.

f)    Assessee filed the instant writ before High Court claiming interest on refund of TDS from the date of deposit of TDS in view of the provisions of Section 244-A of the Act.

The High Court held as under:

1)    In the instant case, though TDS under Sec. 195 was refundable to resident deductor on account of waiver of third installment by German Company. But, the deductor filed the refund claim only after expiry of 18 months from the date of waiver of fee by non-resident.

2)    Therefore, department could not be made liable for interest for any period prior to the date on which facts giving rise to refund were brought to the Department's notice.

3)    Hence, assessee would be entitled to interest on refund under section 244A only from the date of filing the refund claim and not from date of deposit of TDS as law favours the vigilant only and not those who slumber - [2016] 66 taxmann.com 50 (Bombay)