Interest on excess refund – Section 234D is not retrospective and does not apply to assessments that are completed prior to 01-06-2003.

The Revenue filed a Special Leave Petition against the decision of the Bombay High Court dismissing the appeal of the Department following decision in DIT vs. Delta Air Lines Inc. (2013) 358 ITR 367 (Bom.) contending that the above decision had no applicability inasmuch as the question involved was in respect of retrospectivity of section 234D of the Act. Learned counsel for the assessee placed reliance on Explanation 2 inserted in section 234D of the Act by the Finance Act, 2012, with effect from 1st June, 2003. The Supreme Court noted that Explanation 2 which has been inserted in section 234D of the Act read as under:

“Explanation 2 – For the removal of doubts, it is hereby declared that the provisions of this section shall also apply to an assessment year commencing before the 1st day of June 2003, if the proceedings in respect of such assessment year is completed after the said date.”

The Supreme Court observed that the High Court was concerned with the appeal relating to the assessment year 1998-99. It was an admitted position that the assessment of that year was completed prior of 1st June, 2003.

The Supreme Court held that having regards to the legal position which had been clarified by Parliament by insertion of Explanation 2 in section 234D of the Act, in the present case, retrospectivity of section 234D did not arise. The Supreme Court dismissed the Special Leave Petition.