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Informist, Friday, May 8, 2026

 

NEW DELHI – The Supreme Court Friday admitted an appeal by the income tax department to decide whether the provision in the Central Board of Direct Taxes circular to provide for a two-year limitation on claiming refunds of tax deducted at source on payment to non-residents was valid. The income tax department has challenged the Delhi High Court's 2025 ruling that held that the two-year limitation was ultra vires of the Income Tax Act, 1961.

 

In 2006, erstwhile Ranbaxy Laboratories Ltd. invited investment in foreign currency convertible bonds to the tune of $440 million. Though the remittances to bondholders and banks were not subjected to any deduction at source, out of abundant caution, Ranbaxy deposited the tax deducted at source on the entire premium and interest paid on the bonds for the financial years 2010-11 to 2012-13. Thereafter, Ranbaxy claimed a refund of tax deposited. 

 

Ranbaxy merged with Sun Pharmaceutical Industries Ltd. in 2015. In 2018, the tax department rejected Sun Pharmaceutical's refund application citing a limitation period from the 2007 circular. In 2025, the high court allowed applications by Sun Pharmaceutical seeking the refund of excess tax wrongly deducted and deposited for the financial years 2010-11 to 2012-13. 

 

The high court said that the applications by Sun Pharmaceutical for refund had been originally made way back in 2014. Those applications ultimately were rejected by the tax department after a lapse of more than three years in 2018. "Viewed in that light, it is manifest that the stand as taken by the respondents is clearly rendered unjust and arbitrary," the high court said.

 

The Delhi High Court noted previous rulings by the Bombay High Court that CBDT circulars couldn't curtail the statutory provisions by prescribing limitation periods. "The prescription so introduced by the CBDT is clearly ultra vires and beyond the power which Section 119 (of the 1961 Act) sought to confer upon that entity," the high court said. Challenging the high court's ruling, the income tax department moved the apex court.

 

On Friday, shares of Sun Pharmaceutical Industries Ltd. ended 0.7% higher at INR 1,847.90 on the National Stock Exchange.  End

 

Reported by Surya Tripathi

Edited by Avishek Dutta

 

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