[Opinion] A Section That Refuses to Go

Meenakshi Subramaniam – [2024] 164 taxmann.com 219 (Article)

One spaceship was sent on an important mission to remove debris. The astronaut came across Section 248 of income tax, sitting prettily there. It had been removed, but because it had not been fully extinguished, it flew into space. The astronaut tried to tear it, but it stuck back as one whole. He used explosives to blast it, but it remained in one piece. He tried to burn it, but it emerged unscathed. He tried to run a bulldozer over it, but it danced in front of contraption. Finally, an income tax expert said that unless it is thrown out of tax provisions it would not go. So, everyone is waiting for Budget 2024 to remove it.

Why a Need for TDS Refund Arises

In many situations, the deductor after deducting tax realizes that it was not required to be done or was done at a higher rate. The need of refund arises in such cases.

Section 248 was a mischievous provision. To obtain a refund of the tax deducted and paid by a person, where it was not deductible, the taxpayer had to go in for the difficult appellate process. He had to make an appeal to the Commissioner (Appeals) for a declaration that no tax was deductible on such income. Section 248 did not allow making an appeal to an assessing officer, which made the process tedious and long.

In view of mitigating the hardships and rationalizing the refund procedure, the new section 239A was inserted in the Act to provide that such a person, who has made the deduction of tax under such an agreement or arrangement and borne the tax liability, when no tax deduction was required, may file an application for refund of such tax deducted, excluding interest, before the Assessing Officer.

Budget 2022, therefore, simplified and hastened this process of seeking refund on a wrong TDS. An assessee can now make an appeal before the assessing officer, and will be required to approach deputy commissioner or commissioner if he/she is not satisfied by the assessing officer’s order.

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