Amendment in the provisions of section 248 of Income-tax Act and insertion of new section 239A
Section 248 of the Act provides that in a case where, under an agreement or other arrangement, a person who has deducted tax on any income paid to a nonresident, other than interest, under section 195 of the Act, he may appeal to the Commissioner (Appeals) for a declaration that no tax was deductible on such income, if he claims that such tax is to be borne by him since no tax was required to be deducted on such income. Such appeal can be filed after making payment of tax so deducted to the credit of the Government account. Further, section 249 of the Act lays down that an appeal under section 248 of the Act should be filed within 30 days of making payment of such tax to the Government account.
2. To obtain a refund of the tax deducted and paid by a person, where it was not deductible, as per the provisions of section 248 of the Act, a taxpayer has no recourse to approach the Assessing Officer with such request. He has to necessarily enter the appellate process by filing an appeal before the Commissioner (Appeals). At the same time, the agreement or arrangement, under which the tax has been deducted and paid, is not brought on the record of the Assessing Officer or examined by him.
3. In view of the above, it is proposed that a new section 239A may be 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 before the Assessing Officer.
4. Such person can, if he is not satisfied with the order of the Assessing Officer, go into appeal against such order before the Commissioner (Appeals), under section 246A of the Act. Accordingly, the provisions of section 248 of the Act will not apply in cases where the date of tax payment, to the credit of Central Government is on or after 01.04.2022.
5. These amendments will take effect from 1st April, 2022.
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Note on Clauses 66, 68 and 69 of Finance Bill 2022
Clause 66 seeks to insert a new section 239A in the Income-tax Act relating to refund for denying liability to deduct tax in certain cases.
The proposed new section provides that where under an agreement or other arrangement, in writing, the tax deductible on any income, other than interest, under section 195 is to be borne by the person by whom the income is payable, and such person having paid such tax to the credit of the Central Government claims that no tax was required to be deducted on such income, he may file an application before the Assessing Officer for refund of such tax deducted and such application shall be filed by such person only after within a period of thirty days from the date of payment of such tax, in such form and manner as may be provided by rules.
Further, it is proposed that the Assessing Officer shall dispose of the abovementioned application for refund within a period of six months from the end of the month in which such application has been received, after making any such enquiry as he may consider necessary. The Assessing Officer may allow or reject such application by an order in writing, however, no such application shall be rejected unless an opportunity of being heard is given to the applicant.
This amendment will take effect from 1st April, 2022.
Clause 68 seeks to amend section 246A of the Income-tax Act relating to appealable orders before Commissioner (Appeals).
Sub-section (1) of the said section provides for categories of orders against which appeal can be filed before the Commissioner (Appeals).
It is proposed to insert a new clause (ia) in the said sub-section to provide that the orders passed by an Assessing Officer under section 239A shall be appealable before the Commissioner (Appeals).
This amendment will take effect from lst April, 2022.
Clause 69 seeks to amend section 248 of the Income-tax Act relating to appeal by a person denying liability to deduct tax in certain cases.
The said section provides that where under an agreement or other arrangement, the tax deductible on any income, other than interest, under section 195 is to be borne by the person by whom the income is payable, and such person having paid such tax to the credit of the Central Government, claims that no tax was required to be deducted on such income, he may appeal to the Commissioner (Appeals) for a declaration that no tax was deductible on such income.
It is proposed to insert a proviso in the said section to provide that no appeal shall be filed under this section in a case where tax is paid to the credit of the Central Government on or after the 1st day of April, 2022.
This amendment will take effect from 1st April, 2022.
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Extract of Clauses 66, 68 and 69 of Finance Bill 2022
66. Insertion of new section 239A.
After section 239 of the Income-tax Act, the following section shall be inserted, namely:––
“239A. Refund for denying liability to deduct tax in certain cases.
(1) Where under an agreement or other arrangement, in writing, the tax deductible on any income, other than interest, under section 195 is to be borne by the person by whom the income is payable, and such person having paid such tax to the credit of the Central Government claims that no tax was required to be deducted on such income, may, within a period of thirty days from the date of payment of such tax, file an application before the Assessing Officer for refund of such tax in such form and such manner as may be prescribed.
(2) The Assessing Officer shall, by an order in writing, allow or reject the application:
Provided that no application under sub-section (1) shall be rejected unless an opportunity of being heard has been given to the applicant.
(3) The Assessing Officer may, before passing an order under sub-section (2), make such inquiry as he considers necessary.
(4) The order under sub-section (2) shall be passed within six months from the end of the month in which application under sub-section (1) is received.”.
68. Amendment of section 246A.
In section 246A of the Income-tax Act, in sub-section (1), after clause (i), the following clause shall be inserted, namely:––
“(ia) an order made under section 239A;”.
69. Amendment of section 248.
In section 248 of the Income-tax Act, the following proviso shall be inserted, namely:––
“Provided that no appeal shall be filed where tax is paid to the credit of the Central Government on or after the 1st day of April, 2022.”.
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