Income-Tax Act Has No Provision to Grant Refund of Relief Granted Under Section 89 | HC

Case Details: Gurmit Singh Vilkhu vs. Principal Commissioner of Income-tax - [2024] 160 taxmann.com 680 (Madhya Pradesh)

Judiciary and Counsel Details

• Sheel Nagu & Vinay Saraf, JJ.
• Siddharth Sharma, Adv. for the Respondent.

Facts of the Case

The assessee was a bank employee and was suspended by the bank in a departmental enquiry. The bank calculated subsistence allowance for the aforesaid period. While paying the subsistence amount, the bank deducted tax (TDS) under section 192 and paid the balance to the assessee.

To claim a refund of the TDS amount deducted by the bank, the assessee filed the return showing nil income. The return was processed without a refund being granted by the Assessing Officer (AO). Later, the assessee filed an application for rectification under section 154, claiming relief under section 89(1). AO passed an order under section 154 allowing relief under section 89 and referred the matter to the Joint Commissioner for approval.

The Joint Commissioner declined to grant relief, stating that the assessee didn’t claim section 89 relief in the return filed for the relevant assessment year. Accordingly, no relief could be accepted based on the application filed by the assessee later.

AO passed an order under section 154 and declined to grant the assessee any relief under section 89. On writ petition, the High Court directed the AO to allow section 89 relief and refund the excess tax amount order along with interest.

Being dissatisfied with interest calculation, the assessee filed an instant petition before the High Court. The assessee contended that the principal refundable amount should be equivalent to the amount of relief calculated under section 89(1).

High Court Held

The High Court held that section 192 provides that any person responsible for paying any income chargeable under the head salary shall, at the time of payment, deduct income tax on the amount payable at the average rate of income tax computed based on rates in force for the financial year in which the payment is made. However, if the pay and allowance paid to the assessee pertain to more than 12 months, relief under section 89 is allowable, and the assessee can claim relief or rebate in tax calculation. The amount of relief or rebate will be adjusted in the amount of tax payable, and the assessee will pay the due amount of tax. If the tax already paid was more than the amount of tax that comes after adjustment of relief, the same will be refunded to the assessee.

The relief under section 89 is to be considered when calculating the tax payable amount. There is no such provision in the Act to refund the amount of relief granted under section 89 as it is. There may be a situation wherein the assessee may be liable to pay tax even after adjusting/granting relief under section 89. Relief under section 89 is a relief or rebate, not a refund.

List of Cases Referred to

• Gurmeet Singh Vilkhu v. Pr. CIT  [2019] 104 taxmann.com 207/263 Taxman 636 (M.P.) (para 2.12),
• K.C. Joshi v. Union of India [1985] 3 SCC 153 (para 6.1),
• Union of India v. Tata Chemicals Ltd. [2014] 43 taxmann.com 240/222 Taxman 225 (Mag.)/363 ITR 658 (SC) (para 8.1)
• K. Lakshmanya & Co. v. CIT  [2017] 87 taxmann.com 190/[2018] 252 Taxman 13/[2017] 399 ITR 657 (SC) (para 8.2).