CHAPTER XIX

Refunds

Refunds.

62[R1] 237.  If any person satisfies the 63[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 chargeable64[R3]  under this Act for that year, he shall be entitled to a refund of the excess.

 

Person entitled to claim refund in certain special cases.

65[R4] 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.

 

(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.

66[R5] 239.  67[R6] (1)   Every claim for refund under this Chapter shall be made in the prescribed form and verified in the prescribed man­ner.

 

68[R7] [(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, 69[R8] [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 Act70[R9] , refund of any amount becomes due to the assessee, the 71[R10] [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:

 

72[R11] [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.     73[R12] [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.

 

74[R13] Interest on delayed refunds.

243.      75[R14] [(1) If the 76[R15] [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 77[R16] [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  78[R17] [Chief Commissioner or Commissioner] whose decision shall be final.

 

79[R18] [(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.

80[R19] 244.   (1)       Where a refund is due to the assessee in pursuance of an order referred to in section 240 and the 81[R20] [Assessing] Officer does not grant the refund within a period of 82[R21] [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 83[R22] [fif­teen] per cent per annum on the amount of refund due from the date immediately following the expiry of the period of 84[R23] [three] months aforesaid to the date on which the refund is granted.

 

85[R24] [(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 amount 86[R25]  having been paid by him after the 31st day of March, 1975, in pursuance of any order of assessment87[R26]  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 instalments, such interest shall be payable on the amount of each such instalment or any part of such instalment, which was in excess, from the date on which such instalment 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 88[R27] [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.

 

89[R28] [(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.]

 

90[R29] [Interest on refunds.

91[R30] 244A. (1) 92[R31] [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 93[R32] [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 94[R33] [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  95[R34] [under sub-section (1) of section 143 or] on regular assess­ment;

               

(b)        in any other case, such interest shall be calculated at the rate of 96[R35] [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  97[R36] [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.]

 

Set off of refunds against tax remaining payable.

98[R37] 245.     Where under any of the provisions of this Act, a refund is found99[R38]  to be due to any person, the 1[R39] [Assessing] Officer, 2[R40] [Deputy Commissioner (Appeals)] 3[R41] [, Commissioner (Appeals)] or 4[R42] [Chief Commissioner or Commissioner], as the case may be, may, in lieu of payment5[R43]  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. Letter [F. No. 91/31/64-ITJ], dated 9-6-1964, Circular No. 503, dated 6-2-1988, Circular No. 521, dated 17-8-1988, Circular No. 670, dated 26-10-1993; Circular No. 773, dated 15-2-1999 and Circular No. 8/2001, dated 16-5-2001. See also  Income-tax Rules

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

 [R3]For the meaning of the expression “properly chargeable”,

 [R4]See also Circular No. 22(LXXII-17), dated 8-8-1961

 [R5]For order of the Board under section 119(2)(b) condoning delay in filing application for refund, refer  Direct Taxes Circulars. See also Circular No. 225/208/95-IT(A-II), dated 26-10-1993.

 [R6]See rule 41 and Form No. 30 for claim for refund.

 [R7]Substituted by the Finance Act, 1968, w.e.f. 1-4-1968

 [R8]Substituted for “two” by the Finance Act, 1992, w.e.f. 1-4-1993.

 [R9]For the meaning of the expression “other proceeding under this Act”

 [R10]Substituted for “Income-tax” by the Direct Tax Laws (Amend­ment) Act, 1987, w.e.f. 1-4-1988

 [R11]Inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.

 [R12]Prior to its omission, section 241, as 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, read as under :

        “241. Power to withhold refund in certain cases.—Where refund of any amount becomes due to the assessee as a result of an order under this Act or under the provisions of sub-section (1) of section 143 after a return has been made under section 139 or in response to a notice under sub-section (1) of section 142 and the Assessing Officer is of the opinion, having regard to the fact that—

    (i)   a notice has been issued, or is likely to be issued, under sub-section (2) of section 143 in respect of the said return; or

   (ii)   the order is the subject-matter of an appeal or further proceeding; or

(iii)   any other proceeding under this Act is pending,

                                that the grant of the refund is likely to adversely affect the revenue, the Assessing Officer may, with the previous approval of the Chief Commissioner or Commissioner, withhold the refund till such time as the Chief Commissioner or Commissioner may deter­mine.

 [R13]See rule 119A.

 [R14]Substituted for sub-section (1) by the Taxation Laws (Amend­ment) Act, 1970, w.e.f. 1-4-197

 [R15]Substituted for “Income-tax” by the Direct Tax Laws (Amend­ment) Act, 1987, w.e.f. 1-4-1988

 [R16], 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.

 

 [R17]Substituted for “Commissioner” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.

 [R18]Inserted, by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.

 [R19]See rule 119A.

 [R20]Substituted for “Income-tax” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988

 [R21]Substituted for “six months from the date of such order” by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971.

 [R22]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

 [R23]Substituted for “six” by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971

 [R24]Inserted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-10-1975.

 [R25]For the meaning of the term “amount”

 [R26]For the meaning of the expression “order of assessment”

 [R27]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

 [R28]Inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.

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

 [R30]See also Circular No. 20D(XXII-22), dated 20-8-1968.

 [R31]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.

 [R32]Inserted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989.

 [R33]Substituted for “two-third per cent” by the Taxation Laws (Amend­ment) Act, 2003, w.r.e.f. 8-9-2003. Earlier it 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.

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

 [R38]For the meaning of the expression “is found”

 [R39]Substituted for “Income-tax” by the Direct Tax Laws (Amend­ment) Act, 1987, w.e.f. 1-4-1988.

 [R40]Substituted for “Appellate Assistant Commissioner” by the Direct Tax Laws (Amend­ment) Act, 1987, w.e.f. 1-4-1988.

 [R41]Inserted by the Finance (No. 2) Act, 1977, w.e.f. 10-7-1978.

 [R42]Substituted for “Commissioner” by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988

 [R43]For the meaning of the expression “in lieu of payment”