ITAT Delhi on Refund of Excess DDT: Vedanta Ltd. Vs. ACIT (AY 2013-14)

The Delhi Bench “F” of the Income Tax Appellate Tribunal in Vedanta Ltd. Vs. ACIT (ITA No. 5367/Del/2019) examined whether the assessee was entitled to a refund of alleged excess Dividend Distribution Tax (DDT) for Assessment Year 2013-14. The decision, dated 02/02/2023, turns on the treatment of dividend credit under Section 115-O(1A) and the scope of refund under Section 237 of the Income Tax Act 1961.

The Tribunal ultimately did not itself grant or quantify the refund but remanded the matter to the Assessing Officer (AO) to issue refund of excess dividend tax, if any, strictly in accordance with law. The Bench followed its own earlier order in the assessee’s case for AY 2012-13 on an identical issue.

Background of the Appeal

Parties and appellate history

  • Assessee: Vedanta Ltd.
  • Respondent: ACIT
  • Forum: ITAT Delhi, Bench “F”
  • **Appeal No.😗* ITA No. 5367/Del/2019
  • Assessment Year: 2013-14
  • Impugned order: Order dated 12.04.2019 passed by the Commissioner of Income Tax (Appeals)-9, New Delhi (CIT(A)).

The assessee challenged the order of the CIT(A) which had denied a refund claim of Rs. 11,22,14,052, described as excess DDT, on the reasoning that the Income Tax Act 1961 allegedly did not provide for such refund.

Core Issue Before the Tribunal

The central controversy was whether the assessee could claim a refund of Rs. 11,22,14,052, stated to be excess Dividend Distribution Tax paid, where:

  • The assessee had received dividends from subsidiary companies.
  • Those subsidiaries were later amalgamated with the assessee.
  • The assessee claimed to have correctly considered the credit of such dividends under Section 115-O(1A) while computing DDT.
  • According to the assessee, this process resulted in excess DDT payment, for which refund was claimed in the return itself.

The CIT(A) had rejected this claim primarily on the premise that there was no statutory mechanism under the Income Tax Act 1961 to grant a refund of DDT.

Assessee’s Key Contentions

The assessee advanced several arguments before the Tribunal, broadly reflected in the grounds of appeal:

1. Legitimacy of refund claim in the return

  • The assessee argued that the refund of Rs. 11,22,14,052 was a valid claim made in the return of income for AY 2013-14.
  • The computation, according to the assessee, duly accounted for:
    • Credit of dividends received from subsidiary companies; and
    • The mechanism specified in Section 115-O(1A).
  • The subsidiaries from which the dividends were received had subsequently merged with the assessee pursuant to a scheme of amalgamation.

2. Treatment of DDT as additional income tax under Section 237

  • It was contended that DDT is in the nature of additional income tax paid by the assessee.
  • On that basis, if the assessee had paid DDT in excess of the liability determined as per law, a refund of such excess was argued to be permissible under Section 237 of the Income Tax Act 1961.
  • Hence, the assessee submitted that there was no legal bar against granting a refund of excess DDT paid, once the correct tax liability was determined.

3. Objection to CIT(A)’s interpretation of amalgamation scheme