Chapter XIX

 

Refunds

 

Refunds.

 

98[R1] 237.         If any person satisfies the 99[R2] [Assessing] Officer that the amount of tax paid by him or on his behalf or treated as paid by him or on his behalf for any assessment year exceeds the amount with which he is properly chargeable1[R3]  under this Act for that year, he shall be entitled to a refund1[R4]  of the excess.

 

Person entitled to claim refund in certain special cases.

 

2[R5] 238. (1)     Where the income of one person is included under any provision of this Act in the total income of any other person, the latter alone shall be entitled to a refund under this Chapter in respect of such income.

 

The following sub-section (1A) shall be inserted after sub-section (1) of section 238 by the Finance Act, 2005, w.e.f. 1-4-2006 :

 

(1A)     Where the value of fringe benefits provided or deemed to have been provided by one employer is included under any provisions of Chapter XII-H in the value of fringe benefits provided or deemed to have been provided by any other employer, the latter alone shall be entitled to a refund under this Chapter in respect of such fringe benefits.

 

(2)        Where through death, incapacity, insolvency, liquidation or other cause, a person is unable to claim or receive any refund due to him, his legal representative or the trustee or guardian or receiver, as the case may be, shall be entitled to claim or receive such refund for the benefit of such person or his estate.

 

Form of claim for refund and limitation.

 

3[R6] 239. 4[R7] (1)           Every claim for refund under this Chapter shall be made in the prescribed form and verified in the prescribed manner.

 

5[R8] (2)             No such claim shall be allowed, unless it is made within the period specified hereunder, namely :—

 

(a)        where the claim is in respect of income which is assessable for any assessment year commencing on or before the 1st day of April, 1967, four years from the last day of such assessment year;

           

(b)        where the claim is in respect of income which is assessable for the assessment year commencing on the first day of April, 1968, three years from the last day of the assessment year;

           

(c)        where the claim is in respect of income which is assessable for any other assessment year, 6[R9] [one] year from the last day of such assessment year.]

   

The following clause (d) shall be inserted after clause (c) of sub-section (2) of section 239 by the Finance Act, 2005, w.e.f. 1-4-2006 :

 

(d)        where the claim is in respect of fringe benefits which are assessable for any assessment year commencing on or after the first day of April, 2006, one year from the last day of such assessment year.

 

Refund on appeal, etc.

 

240.     Where, as a result of any order passed in appeal or other proceeding under this Act 7[R10] , refund of any amount becomes due to the assessee, the 8[R11] [Assessing] Officer shall, except as otherwise provided in this Act, refund the amount to the assessee without his having to make any claim in that behalf:

 

9[R12] Provided that where, by the order aforesaid,—

 

(a)        an assessment is set aside or cancelled and an order of fresh assessment is directed to be made, the refund, if any, shall become due only on the making of such fresh assessment;

           

(b)        the assessment is annulled, the refund shall become due only of the amount, if any, of the tax paid in excess of the tax chargeable on the total income returned by the assessee.]

 

Power to withhold refund in certain cases.

 

241. 10[R13] [Omitted by the Finance Act, 2001, w.e.f. 1-6-2001.]

 

Correctness of assessment not to be questioned.

 

242.     In a claim under this Chapter, it shall not be open to the assessee to question the correctness of any assessment or other matter decided which has become final and conclusive or ask for a review of the same, and the assessee shall not be entitled to any relief on such claim except refund of tax wrongly paid or paid in excess.

 

11[R14] Interest on delayed refunds.

 

243. 12[R15] (1) If the 13[R16] [Assessing] Officer does not grant the refund,—

 

(a)        in any case where the total income of the assessee does not consist solely of income from interest on securities or dividends, within three months from the end of the month in which the total income is determined under this Act, and

           

(b)        in any other case, within three months from the end of the month in which the claim for refund is made under this Chapter,the Central Government shall pay the assessee simple interest at 14[R17] [fifteen] per cent per annum on the amount directed to be refunded from the date immediately following the expiry of the period of three months aforesaid to the date of the order granting the refund.

 

Explanation.—If the delay in granting the refund within the period of three months aforesaid is attributable to the assessee, whether wholly or in part, the period of the delay attributable to him shall be excluded from the period for which interest is payable.]

 

(2)        Where any question arises as to the period to be excluded for the purposes of calculation of interest under the provisions of this section, such question shall be determined by the 15[R18] [Chief Commissioner or Commissioner] whose decision shall be final.

 

16[R19] (3)          The provisions of this section shall not apply in respect of any assessment for the assessment year commencing on the 1st day of April, 1989 or any subsequent assessment years.]

 

Interest on refund where no claim is needed.

 

17[R20] 244. (1) Where a refund is due to the assessee in pursuance of an order referred to in section 240 and the 18[R21] [Assessing] Officer does not grant the refund within a period of 19[R22] [three months from the end of the month in which such order is passed], the Central Government shall pay to the assessee simple interest at 20[R23] [fifteen] per cent per annum on the amount of refund due from the date immediately following the expiry of the period of 21[R24] [three] months aforesaid to the date on which the refund is granted.

 

22[R25] (1A)        Where the whole or any part of the refund referred to in sub-section (1) is due to the assessee, as a result of any amount23[R26]  having been paid by him after the 31st day of March, 1975, in pursuance of any order of assessment24[R27]  or penalty and such amount or any part thereof having been found in appeal or other proceeding under this Act to be in excess of the amount which such assessee is liable to pay as tax or penalty, as the case may be, under this Act, the Central Government shall pay to such assessee simple interest at the rate specified in sub-section (1) on the amount so found to be in excess from the date on which such amount was paid to the date on which the refund is granted :

 

Provided that where the amount so found to be in excess was paid in installments, such interest shall be payable on the amount of each such installment or any part of such installment, which was in excess, from the date on which such installment was paid to the date on which the refund is granted :

 

Provided further that no interest under this sub-section shall be payable for a period of one month from the date of the passing of the order in appeal or other proceeding :

 

Provided also that where any interest is payable to an assessee under this sub-section, no interest under sub-section (1) shall be payable to him in respect of the amount so found to be in excess.]

 

(2)        Where a refund is withheld under the provisions of section 241, the Central Government shall pay interest at the aforesaid rate on the amount of refund ultimately determined to be due as a result of the appeal or further proceeding for the period commencing after the expiry of 25[R28] [three months from the end of the month in which the order referred to in section 241 is passed] to the date the refund is granted.

 

26[R29] (3)          The provisions of this section shall not apply in respect of any assessment for the assessment year commencing on the 1st day of April, 1989, or any subsequent assessment years.]

 

27[R30] Interest on refunds.

 

28[R31] 244A. (1)            29[R32] Where refund of any amount becomes due to the assessee under this Act], he shall, subject to the provisions of this section, be entitled to receive, in addition to the said amount, simple interest thereon calculated in the following manner, namely :—

 

(a)        where the refund is out of any tax 30[R33] [paid under section 115WJ or]31[R34] [collected at source under section 206C or] paid by way of advance tax or treated as paid under section 199, during the financial year immediately preceding the assessment year, such interest shall be calculated at the rate of 32[R35] [one-half per cent] for every month or part of a month comprised in the period from the 1st day of April of the assessment year to the date on which the refund is granted:

 

Provided that no interest shall be payable if the amount of refund is less than ten per cent of the tax as determined 33[R36] [under 34[R37] [sub-section (1) of section 115WE or] sub-section (1) of section 143 or] on regular assessment;

 

(b)        in any other case, such interest shall be calculated at the rate of 35[R38] [one-half per cent] for every month or part of a month comprised in the period or periods from the date or, as the case may be, dates of payment of the tax or penalty to the date on which the refund is granted.

 

Explanation.—For the purposes of this clause, “date of payment of tax or penalty” means the date on and from which the amount of tax or penalty specified in the notice of demand issued under section 156 is paid in excess of such demand.

 

(2)        If the proceedings resulting in the refund are delayed for reasons attributable to the assessee, whether wholly or in part, the period of the delay so attributable to him shall be excluded from the period for which interest is payable, and where any question arises as to the period to be excluded, it shall be decided by the Chief Commissioner or Commissioner whose decision thereon shall be final.

 

(3)        Where, as a result of an order under 36[R39] [sub-section (3) of section 115WE or section 115WF or section 115WG or] 37[R40] [sub-section (3) of section 143 or section 144 or] section 147 or section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264 or an order of the Settlement Commission under sub-section (4) of section 245D, the amount on which interest was payable under sub-section (1) has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and in a case where the interest is reduced, the Assessing Officer shall serve on the assessee a notice of demand in the prescribed form specifying the amount of the excess interest paid and requiring him to pay such amount; and such notice of demand shall be deemed to be a notice under section 156 and the provisions of this Act shall apply accordingly.

 

(4)        The provisions of this section shall apply in respect of assessments for the assessment year commencing on the 1st day of April, 1989, and subsequent assessment years.]

 

The following proviso shall be inserted to sub-section (4) of section 244A by the Finance Act, 2005, w.e.f. 1-4-2006 :

 

Provided that in respect of assessment of fringe benefits, the provisions of this sub-section shall have effect as if for the figures “1989”, the figures “2006” had been substituted.

 

Set off of refunds against tax remaining payable.

 

38[R41] 245.        Where under any of the provisions of this Act, a refund is found39[R42]  to be due to any person, the 40[R43] [Assessing] Officer, 41[R44] [Deputy Commissioner (Appeals)] 42[R45] [, Commissioner (Appeals)] or 43[R46] [Chief Commissioner or Commissioner], as the case may be, may, in lieu of payment44[R47]  of the refund, set off the amount to be refunded or any part of that amount, against the sum, if any, remaining payable under this Act by the person to whom the refund is due, after giving an intimation in writing to such person of the action proposed to be taken under this section.

 

 

 [R1]See also Circular No. 23 (LXXII-18), dated 3-8-1962 and Letter [F. No. 91/31/64-ITJ], dated  9-6-1964.

 [R2]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f.  1-4-1988.

 [R3]

 [R4]

 [R5]See also Circular No. 22(LXXII-17), dated 8-8-1961

 [R6]

 [R7]See rule 41 and Form No. 30 for claim for refund

 [R8]Substituted by the Finance Act, 1968, w.e.f. 1-4-1968

 [R9]Substituted for “two” by the Finance Act, 1992, w.e.f. 1-4-1993

 [R10]

 [R11]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988

 [R12]Inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989

 [R13]Prior to its omission, section 241 was amended by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988 and later on substituted by the Direct Tax Laws (Second Amendment) Act, 1989, w.e.f. 1-4-1989

 [R14]See rule 119A

 [R15]Substituted for sub-section (1) by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971.

 [R16]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988

 [R17]Substituted for “twelve” by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-10-1984. Earlier “twelve” was substituted for “nine” by the Finance Act, 1972, w.e.f. 1-4-1972. Section 84 of the Amendment Act, 1984 has clarified that the increase in the rate of interest will apply in respect of any period falling after 30-9-1984, and also in those cases where the interest became chargeable or payable from an earlier date.

 [R18]Substituted for “Commissioner” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f.  1-4-1988

 [R19]Inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.

 [R20]See rule 119A

 [R21]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f.  1-4-1988.

 [R22]Substituted for “six months from the date of such order” by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971

 [R23]Substituted for “twelve” by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-10-1984. Earlier, “twelve” was substituted for “nine” by the Finance Act, 1972, w.e.f. 1-4-1972, “nine” was substituted for “six” by the Taxation Laws (Amendment) Act, 1967, w.e.f. 1-10-1967 and “six” was substituted for “four” by the Finance Act, 1965, w.e.f. 1-4-1965.

 [R24]Substituted for “six” by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971

 [R25]Inserted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-10-1975

 [R26]

 [R27]

 [R28]Substituted for “six months from the date of the order referred to in section 241” by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971

 [R29]Inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989

 [R30]Inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989

 [R31]See also Circular No. 20D(XXII-22), dated 20-8-1968

 [R32]Substituted for “Where, in pursuance of any order passed under this Act, refund of any amount becomes due to the assessee” by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989

 [R33]The italicised words shall be inserted by the Finance Act, 2005, w.e.f. 1-4-2006.

 [R34]Inserted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.

 [R35]                Substituted for “two-third per cent” by the Taxation Laws (Amendment) Act, 2003, w.e.f. 8-9-2003. Earlier “two-third per cent” was substituted for “three-fourth per cent” by the Finance Act, 2002, w.e.f. 1-6-2002, “three-fourth per cent” was substituted for “one per cent” by the Finance Act, 2001, w.e.f. 1-6-2001 and “one per cent” was substituted for “one and one-half per cent” by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991.

 [R36]Inserted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989

 [R37]The italicised words shall be inserted by the Finance Act, 2005, w.e.f. 1-4-2006

 [R38]            Substituted for “two-third per cent” by the Taxation Laws (Amendment) Act, 2003, w.e.f. 8-9-2003. Earlier “two-third per cent” was substituted for “three-fourth per cent” by the Finance Act, 2002, w.e.f. 1-6-2002, “three-fourth per cent” was substituted for “one per cent” by the Finance Act, 2001, w.e.f. 1-6-2001 and “one per cent” was substituted for “one and one-half per cent” by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991

 [R39]The italicised words shall be inserted by the Finance Act, 2005, w.e.f. 1-4-2006

 [R40]Inserted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989

 [R41]See also Circular No. 3-D(LXXII-21), dated 29/31-1-1968

 [R42]

 [R43]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988

 [R44]Substituted for “Appellate Assistant Commissioner” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988

 [R45]Inserted by the Finance (No. 2) Act, 1977, w.e.f. 10-7-1978.

 [R46]Substituted for “Commissioner” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f.  1-4-1988

 [R47]