S. 234D applies to proceeding completed on or after 1st June,2003, irrespective of A.Y. to which it pertains

Under the existing provisions of section 234D of the Income-tax Act (inserted with effect from 1.6.2003, vide Finance Act, 2003), where any refund has been granted to the assessee under sub-section (1) of section  143  and subsequently on regular assessment, no refund or lesser amount of refund is found due to the assessee, then, the assessee shall be liable to pay simple interest at the rate of one-half per cent on the excess amount so refunded for the period starting from the date of refund to the date of such regular assessment.

In a recent decision of the Court, it has been held that the provisions of section 234D inserted with effect from 1.6.2003 would be applicable from the assessment year 2004-05 only and accordingly no interest could be charged for earlier assessment years even though the regular assessments for such years were framed after 1st June, 2003 or refund was granted for those years after the said date.

This is not in conformity with the legislative intent of the provision.

It is, therefore, proposed to clarify that the provisions of section 234D would be applicable to any proceeding which is completed on or after 1st  June, 2003, irrespective of the assessment year to which it pertains.

This amendment will take effect retrospectively from the 1st  day of June, 2003.


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  1. vswami says:

    Refer the additional comment posted under the Related Post ” 3. Section 234D of the Act applicable only from the assessment year 2004-05 onwards and not for the earlier assessment years” made a mention of above.

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September 2021