Section 244 l Interest on Refund Where No Claim Is Needed
Circular No. 209 was issued by the Central Board of Direct Taxes on 11 January 1977. Its subject is Section 244 l Interest on Refund Where No Claim Is Needed.
Explains the new section 244(1A) and tells officers to give appeal effect within a month. Section 244(1) already gave simple interest at 12 per cent per annum where a refund arising from an appellate or other order was not granted within three months of the end of the month of the order, running from the end of that period to the date of refund. Sub-section (1A), inserted by the Taxation Laws (Amendment) Act, 1975 with effect from 1 October 1975, makes the Central Government pay interest on an amount paid in pursuance of an assessment or penalty order and later found refundable, from the date the disputed amount was originally paid to the date the refund is granted, but only where the appellate or other order is passed on or after 1 October 1975 and the payment was made after 31 March 1975. No interest runs for one month from the date of that order; so if the refund is granted within a month, interest runs from payment to the date of the order, and if it is delayed longer, from payment to the date of refund less one month. Where tax or penalty was paid in instalments, interest is computed on each instalment or part found excessive from the date it was paid. Where interest is payable under sub-section (1A), none is paid under sub-section (1). Rule 119A, effective 1 January 1975, requires the period to be rounded to whole months, ignoring fractions, and the amount to be rounded down to the nearest multiple of one hundred rupees.
Because interest under sub-section (1A) starts running one month after the appellate or other order, the Board wanted appellate, revisionary and other orders received in time and given effect with extraordinary promptness, in any case within a month of the date of the order.
| Under the 1961 Act | Now |
|---|---|
| s.244 | no counterpart recorded |
SECTION 244 l INTEREST ON REFUND WHERE NO CLAIM IS NEEDED
1244. Scope of sub-section (1A) inserted by Taxation Laws (Amendment) Act, 1975 explained - Instructions for giving appeal effects promptly
1. Section 244(1) provides that where a refund is due to the assessee as a result of any order passed in appeal, or other proceedings under the Act and the refund is not granted within a period of three months from the end of the month in which such order is passed, the assessee will be entitled to receive simple interest at 12 per cent per annum on the amount of the refund due from the date immediately following the expiry of the aforesaid period of three months to the date on which the refund is granted.
2. Taxation Laws (Amendment) Act, 1975 has inserted a new sub-section (1A) in section 244 with effect from October 1, 1975 providing that where any amount has been paid by the assessee in pursuance of any order of assessment or penalty and the assessee becomes entitled to a refund in respect of such amount or any part thereof, as a result of an appellate order or other proceedings under the Act, the Central Government shall pay interest on the amount so refundable from the date on which the disputed amount was originally paid to the date on which the refund is granted. This provision will be applicable only if the refund is arising out of orders in appeal or other proceedings passed on or after October 1, 1975 and the payment has been made after March 31, 1975. No interest will, however, be payable for a period of one month from the date of the order passed in appeal or other proceedings. In other words, where the refund is granted within one month of the date of the order giving rise to the refund,interest will be payable from the date of payment to the date of such order and where the refund is delayed for more than a month from the date of the order giving rise to the refund, interest will be payable for the period from the date of the payment to the date of granting the refund as reduced by one month.
3. Where the amount of tax or penalty has been paid in instalments, interest will be calculated on the amount of each such instalment or any part thereof, which is found to be in excess in appeal or other proceedings from the date on which such instalment was paid to the date on which the refund is granted. However, where interest is payable under the new sub-section (1A), no interest will be paid under sub-section (1) of section 244.
4. In this connection , it may also be noted that in view of the provisions in rule 119A effective from January 1, 1975, the period for which interest is to be calculated is rounded off to whole month and for this purpose any fraction of a month is ignored. Besides this, the amount of tax, penalty, etc., in respect of which interest is to be calculated, will be rounded off to the nearest multiple of one hundred rupees and for this purpose any fraction of one hundred rupees shall be ignored.
5. In view of the fact that in cases falling for consideration under section 244(1A) interest will have to be paid by the Central Government after one month itself from the date of the appellate or other order, it is of paramount importance to ensure that appellate, revisionary or other orders are received in time and given effect to with extraordinary promptness ensuring that in any case they are given effect to within a month of the date of the order.
6. The above provisions of the Act may be specifically brought to the notice of all the officers working in your charge.
Circular : No. 209 [F. No. 212/485/76-(A-II)], dated 11-1-1977.
In an appeal effect order or a refund voucher where the interest computed is disputed, and in a grievance over delay in giving effect to an appellate order.
An assessee pays a disputed demand of Rs. 1,00,000 in June 1975, wins in appeal by an order of 1 November 1976, and the refund is granted on 1 March 1977. Interest under section 244(1A) runs from the date of payment to the date of refund, less one month for the delay after the order — and the period is taken in whole months, fractions being ignored, with the principal taken at the nearest lower multiple of one hundred rupees. No separate interest under section 244(1) is payable on top.
Rules it names. Rule 119A of the Income-tax Rules, 1962. The 1962 Rules were replaced by the Income-tax Rules, 2026, which renumbered nearly everything: a rule number quoted here almost never means the same rule today.
Source: the Income Tax Department’s own published text — its page for this instrument.