Section - 234D (of Income Tax Act, 1961), Interest on excess refund

(1) Subject to the other provisions of this Act, where any refund is granted to the assessee under sub-section (1) of section 143 (of Income Tax Act, 1961), and—

(a) no refund is due on regular assessment; or

(b) the amount refunded under sub-section (1) of section 143 (of Income Tax Act, 1961) exceeds the amount refundable on regular assessment, the assessee shall be liable to pay simple interest at the rate of one-half per cent on the whole or the excess amount so refunded, for every month or part of a month comprised in the period from the date of grant of refund to the date of such regular assessment.

(2) Where, as a result of an order under section 154 (of Income Tax Act, 1961) or section 155 (of Income Tax Act, 1961) or section 250 (of Income Tax Act, 1961) or section 254 (of Income Tax Act, 1961) or section 260 (of Income Tax Act, 1961) or section 262 (of Income Tax Act, 1961) or section 263 (of Income Tax Act, 1961) or section 264 (of Income Tax Act, 1961) or an order of the Settlement Commission under sub-section (4) of section 245D (of Income Tax Act, 1961), the amount of refund granted under sub-section (1) of section 143 (of Income Tax Act, 1961) is held to be correctly allowed, either in whole or in part, as the case may be, then, the interest chargeable, if any, under sub-section (1) shall be reduced accordingly.

Explanation 1.— Where, in relation to an assessment year, an assessment is made for the first time under section 147 (of Income Tax Act, 1961) or section 153A (of Income Tax Act, 1961), the assessment so made shall be regarded as a regular assessment for the purposes of this section.

Explanation 2.— For the removal of doubts, it is hereby declared that the provisions of this section shall also apply to an assessment year commencing before the 1st day of June, 2003 if the proceedings in respect of such assessment year is completed after the said date.