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Refund of Tax under Income Tax Act, 1961 - Under Section 237 to 245


Contents -

1. Introduction of Refund of Tax.
2. Section 237 - The reasons for the refund.
3. Section 238 - Claim for Refund.
4. Refund in the Case of Appeal - Section 240, 241, 242, 243, 244.
5. Section 245 - Set off of Refund Against Tax Remaining Payable.
6. section 245 C - Application for Settlement of Cases.
7. Section 245D (4A) - The Settlement Commission shall pass an order.

Question : Short note on "Refund of Tax".

  • Introduction -
The meaning of refund is "to pay back".
The person who has made the excess payment of tax can be claimed for refund. This topic related to the refund of tax if any to the assessee. When the tax is paid in excess of the tax liability determined by the assessing officer for the relevant year or the order passed in the appeals, the tax liability is reduced and the excess amount of tax is refunded by the government to the assessee.

The following sections are provided for the refund of excess tax paid by the assessee.

Section 237 -
If any person satisfies the assessing officer that the amount of tax paid by him or on his/her behalf or treated as tax paid by him or his behalf for any assessment year exceeds the amount of tax with which he/she is properly chargeable under this Act for that year, he/she shall be entitled to a refund of the excess.

Following are the reasons for the refund :
  1. Grant of double taxation relief.
  2. The tax deducted from salaries, interest on securities or debentures, higher than the tax determined on regular assessment.
  3. The amount of advanced tax paid is higher than the tax payable on regular assessment.
  4. The tax refundable after the rectification of the assessment order.

Section 238 -
The person who has made the excess payment of tax can be claimed for refund.
If the income of other person's included in the former's income under section 60 to 64, then the latter can claim for the refund.
If the person here may be said as assessee unable to claim the refund due to death, insolvency, disability in the case of liquidation, his/her legal representative may claim for refund.

Claim for Refund :

1. The assessee must claim for refund in Form no 30 within one year from the last date of the assessment year to which the claim is related.

2. No such claim shall be allowed, unless it is made within the period specified here under namely :
a) 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.

b) 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.

c) Where the claim is in respect of income which is assessable for any other assessment year, one year from the last day of such assessment year.

d) Where the claim is in respect of income which is assessable for any other assessment year commencing on the 1st day of April, 1968, three years from the last day of the assessment year.

  • Refund in the Case of Appeal
Section 240 -
Where as the result of any order passed in appeal order proceeding under this Act, refund of any amount becomes due to the assessee. The assessment 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.

Section 241 -
Omitted by Finance Act, 2001 w.e.f. 1st June, 2001. 

Section 242 -
When the assessment or other matter has become final and conclusive, the assessee shall not be entitled to any relief on such claim except refund of tax wrongly paid or paid in excess. In short the correctness of assessment shall not be questioned by the assessee.

Section 243 -
If the delay in granting the refund within the period of three months to the assessee, the period of the delay attributable to him shall be excluded from the period for which is payable.
The central government shall pay the assessee simple interest at 15% 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.
The 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 year.
Where any question arises as to the period to be excluded for the purpose of calculation of interest under the provisions of this section, such questions shall be determined by the Commissioner whose decision shall be final.

Section 244 -
Where however, the grant of refund is delayed for reasons attributable to the assessee, no interest shall be payable on the refund in respect of such period of delay. Assessing officer have been instructed to ensure that interest payable under section 244A on the amount of refund due is granted simultaneously with the grant of refund without omission or delay.
Where the amount of refund due to the assessee, out of any tax deducted or collected at source or any advance tax deposited or any advance fringe benefit tax paid under section 115WJ, is 10% or more of the tax determined under section 143(1) or 115WJ (1), the assessee is entitled to interest at 0.5 % for every month commencing from 1st April of assessment year to the rate of refund.

Section 245 : Set off of Refunds Against Tax Remaining Payable -
The Assessing officer, Deputy commissioner (Appeals), Commissioner (Appeals) or Chief commissioner, as the case may be adjust / set off the refund against any tax payable in the matters painting, after giving and intimation in writing to such person of the action proposed to be taken under this section.

Section 245 C : Application for Settlement of Cases -
An assessee may, at any stage of a case relating to him make an application in such form and in such manner as may be prescribed and containing a full and true disclosure of his income which has not been disclosed before the Assessing Officer. The manner in which such income has been derived the additional amount of income tax payable on such income and such other particulars as may be prescribed, to the Settlement Commission to have the case settled and any such application shall be disposed of in the manner here in after provided :

Provided that no application shall be made unless :

1. In any other case, the additional amount of income tax payable on the income disclosed in the application exceeds Rs.10 lakhs.

2. In a case where proceeding for assessment or reassessment for any of the assessment year referred to in Section 153A(1)(b) or Section 153(1)(b) in the

3. Case of a person referred to in Section 153A or Section 153C have been initiated the additional amount of income tax payable on the disclosed in the application exceeds Rs.10 lakhs.

Section 245 (2) : 
Every application shall be accompanied by such fees as may be prescribed.

Section 245 (3) :
An application made shall not be allowed to be withdrawn by the applicant.

Section 245D (4A) : The Settlement Commission shall Pass an Order :
  1. In respect of an application made on or after the 1st day of June, 2010, with in 18 months from the end of the month in which application was made.
  2. In respect of an application referred to Section 245 (2A) or (2D), on or before 31st March, 2008.
  3. In respect of an application made on or after 1st day of June, 2007 but before 1st day of June, 2010, within 12 months from the end of the month the application was made.




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