Interest on delayed refunds.

Section 56

If any tax ordered to be refunded under sub-section (5) of section 54 to any applicant is not refunded within sixty days from the date of receipt of application under sub-section (1) of that section, interest at such rate not exceeding six per cent as may be specified in the notification issued by the Government on the recommendations of the Council shall be payable in respect of such refund [for the period of delay beyond sixty days from the date of receipt of such application till the date of refund of such tax, to be computed in such manner and subject to such conditions and restrictions as may be prescribed]:

Provided that where any claim of refund arises from an order passed by an adjudicating authority or Appellate Authority or Appellate Tribunal or court which has attained finality and the same is not refunded within sixty days from the date of receipt of application filed consequent to such order, interest at such rate not exceeding nine per cent as may be notified by the Government on the recommendations of the Council shall be payable in respect of such refund from the date immediately after the expiry of sixty days from the date of receipt of application till the date of refund.

Explanation.—For the purposes of this section, where any order of refund is made by an Appellate Authority, Appellate Tribunal or any court against an order of the proper officer under sub-section (5) of section 54, the order passed by the Appellate Authority, Appellate Tribunal or by the court shall be deemed to be an order passed under the said sub-section (5).

AI Explanation

When a tax refund is ordered under sub-section (5) of section 54 and is not issued within sixty days from the application date under sub-section (1) of that section, interest becomes applicable. This article explains the conditions and rates for interest payments on delayed tax refunds.

General Refund Interest Provisions

If a tax refund, ordered under sub-section (5) of section 54, is not processed within sixty days from the application submission date, the applicant is entitled to interest. The interest rate, not exceeding six per cent, is determined by the Government based on the Council's recommendations and specified in a notification.

Specific Refund Scenarios

In cases where a refund claim stems from a finalized order by an adjudicating authority, Appellate Authority, Appellate Tribunal, or court, and the refund is not issued within sixty days from the application date, a higher interest rate applies. The Government, on the Council's recommendations, may specify an interest rate, not exceeding nine per cent, through notification.

Explanation of Refund Orders by Higher Authorities

For the purposes of this section, if an Appellate Authority, Appellate Tribunal, or court issues a refund order against the proper officer's decision under sub-section (5) of section 54, the order from the higher authority is considered equivalent to an order issued under the said sub-section (5).

Conclusion:

These provisions ensure that taxpayers receive timely refunds, and in cases of delays, interest rates are specified to compensate for the inconvenience. It is essential for both applicants and authorities to adhere to the stipulated timelines to maintain a fair and efficient tax refund process.