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Section 234D of the Income-tax Act, 1961 - Interest on refunds - Assessment year 1999-2000 - Whether section 234D which was introduced by Finance Act, 2003 with effect from 1-6-2003 would apply to all cases of refund granted under section 143(1) but interest under that section can be levied only with effect from 1-6-2003 - Held, yes FACTS During the assessment year 1999-2000, the assessee had remitted substantial amount of advance tax. In the return it claimed refund which was granted, while sending intimation under section 143(1) on 28-6-2000. However, in the regular assessment completed on 22-1-2004, it was found that refund granted while sending intimation was irregular inasmuch as the entire amount refunded was payable as tax finally assessed. The Assessing Officer, therefore, demanded interest under section 234D on the refund amount granted on 28-6-2000, but from 1-6-2003 the date on which section 234D came into force. However, the Commissioner while exercising power under section 263, held that interest was payable from the date of refund till date of regular assessment. On appeal, the Tribunal held that section 234D providing for interest would apply only from the assessment year 2004-05 onwards and, hence, the assessee was not liable to pay any interest. On revenue's appeal : HELD Admittedly, section 234D was introduced by the Finance Act, 2003 with effect from 1-6-2003. This provision on interest is not introduced with reference to any assessment year, which is obvious from the fact that it is not effective from the beginning of the financial year. On the other hand, provision on interest will apply to all cases of refund granted under section 143(1) but interest can be levied only with effect from 1-6-2003. Even though in the instant case refund was granted while sending intimation under section 143(1) on 28-6-2000 and regular assessment under section 143(3) was completed converting the refund to demand of tax on 22-1-2004, interest could be demanded only for the period from 1-6-2003 till 22-1-2004 which was done by the Assessing Officer. Thus, there was no justification for the Commissioner to give any retrospectivity to section 234D as he had…

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