Section 238 — Person Entitled to Claim Refund in Certain Special Cases
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Status: Live. Identifies, in special situations, the person entitled to claim or receive a refund — where income of one person is included in another's total income, and where the person entitled is dead, incapacitated, insolvent, in liquidation or otherwise unable to claim.
FA 2026: No amendment by the Finance Act, 2026.
A. SECTION COMMENTARY
Section 238 answers the question "who may claim?" in three special cases. Under sub-section (1), where the income of one person is, under any provision of the Act, included in the total income of another (the classic instance being the clubbing provisions, sections 60 to 64), it is the latter — the person in whose hands the income is assessed — who alone is entitled to the refund in respect of that income. The refund follows the assessment of the income, not its origin.
Sub-section (1A) carries the same logic into the now-historic fringe-benefit-tax regime of Chapter XII-H: where fringe benefits provided by one employer are included in the value of fringe benefits of another employer, the latter alone may claim the refund. The provision survives in the text although fringe benefit tax was abolished with effect from assessment year 2010-11.
Sub-section (2) is a representative-capacity provision. Where, through death, incapacity, insolvency, liquidation or other cause, a person is unable to claim or receive a refund due to him, his legal representative, trustee, guardian or receiver, as the case may be, may claim or receive it for the benefit of that person or his estate. It dovetails with the representative-assessee and legal-representative provisions of the Act (sections 159 to 167 and section 160 onwards), ensuring that the right to refund is not defeated by the disability or demise of the person entitled.
The section is essentially machinery, allocating the right to claim; it has generated little direct litigation. Its operation is governed by the substantive refund right in section 237 and by the general law on representative capacity and devolution of estates.
B. STATUTORY POSITION (verbatim text)
Reproduced from the local Act (base text to the Finance Act, 2025).
238. (1) Where the income of one person is included under any provision of this Act in the total income of any other person, the latter alone shall be entitled to a refund under this Chapter in respect of such income.
(1A) Where the value of fringe benefits provided or deemed to have been provided by one employer is included under any provisions of Chapter XII-H in the value of fringe benefits provided or deemed to have been provided by any other employer, the latter alone shall be entitled to a refund under this Chapter in respect of such fringe benefits.
(2) Where through death, incapacity, insolvency, liquidation or other cause, a person is unable to claim or receive any refund due to him, his legal representative or the trustee or guardian or receiver, as the case may be, shall be entitled to claim or receive such refund for the benefit of such person or his estate.
C. AUTHORITIES
Section 238 is a machinery provision allocating the right to claim a refund; there is little direct reported authority on it. The principle that the refund follows the person in whose hands the income is assessed flows from section 237 (above) and from the clubbing scheme; the representative-capacity rule in sub-section (2) is applied in line with the general law on legal representatives. Where a specific factual dispute arises (for example, competing claims between an estate and a third party), it is resolved on those general principles rather than on any gloss peculiar to section 238.
Substantive right and "due" refund (applied to the section 238 claimant)
The substantive right that section 238 channels to the specified claimant is that in section 237; the following decisions, though arising under sections 237/240/244A, supply the governing principles.
Union of India v. Tata Chemicals Ltd. (2014) 363 ITR 658 (SC)
Facts: The assessee-deductor, on a reference under section 195(2), was directed to deduct tax on remittances to a non-resident. In appeal the CIT(A) held that reimbursement of expenses was not chargeable in the non-resident's hands; the tax deducted and deposited on that component thus became refundable to the deductor, which claimed interest on it.
Held: A tax refund due to a resident/deductor on excess tax deducted and deposited under section 195 must be refunded with interest under section 244A from the date of payment. The obligation to refund money received and retained without right carries with it the right to interest; "refund becomes due" the moment the State has no lawful authority to retain the sum. The Department's reliance on the absence of an express provision was rejected — section 244A is wide enough to cover the deductor's refund (the matter being governed by section 244A(1)(b) read with section 240).
Significance: The leading modern authority on the State's duty to pay interest on unauthorisedly retained tax. It anchors both the refund right (section 237/240) and the interest right (section 244A) and has been followed repeatedly, including by the Supreme Court in Universal Cables Ltd. v. CIT.
CIT v. Chittoor Electric Supply Corporation (SC)
Court: Supreme Court of India (as reported).
Facts: On appeal the matter was restored to the Assessing Officer to frame a fresh assessment; thereafter a refund was determined. The assessee claimed interest from the date of the first appellate order to the date of refund.
Held: No refund can be said to have become "due" while assessment proceedings are still pending; "when the assessment proceedings are still pending, it is idle to talk of any amount or any refund becoming due to the assessee in respect of that assessment year, particularly in the light of section 237." Where a fresh assessment has been directed (proviso (a) to section 240), the refund — and hence interest on it — becomes due only on the making of the fresh assessment, not from the date of the appellate order.
Significance: Establishes that the refund must first be "due" before any refund or interest can arise; it is the textual companion to proviso (a) of section 240 and to the "amount becomes due" language of sections 243, 244 and 244A.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced from the local Act (base text amended up to the Finance Act, 2025); the publisher's footnote apparatus and amendment-marker brackets have been removed, and three asterisks (***) denote words or a sub-section omitted by amendment and retained only to mark the omission. Finance Act, 2026 changes are flagged in the commentary. Citations are stated as reported. Where a section has not been the subject of a direct reported decision, that is stated candidly and the nearest governing authority or circular is given. This digest is for professional reference and is not legal advice.
CHAPTER XIX — REFUNDS
Section 238 — Person Entitled to Claim Refund in Certain Special Cases
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Status: Live. Identifies, in special situations, the person entitled to claim or receive a refund — where income of one person is included in another's total income, and where the person entitled is dead, incapacitated, insolvent, in liquidation or otherwise unable to claim.
FA 2026: No amendment by the Finance Act, 2026.
A. SECTION COMMENTARY
Section 238 answers the question "who may claim?" in three special cases. Under sub-section (1), where the income of one person is, under any provision of the Act, included in the total income of another (the classic instance being the clubbing provisions, sections 60 to 64), it is the latter — the person in whose hands the income is assessed — who alone is entitled to the refund in respect of that income. The refund follows the assessment of the income, not its origin.
Sub-section (1A) carries the same logic into the now-historic fringe-benefit-tax regime of Chapter XII-H: where fringe benefits provided by one employer are included in the value of fringe benefits of another employer, the latter alone may claim the refund. The provision survives in the text although fringe benefit tax was abolished with effect from assessment year 2010-11.
Sub-section (2) is a representative-capacity provision. Where, through death, incapacity, insolvency, liquidation or other cause, a person is unable to claim or receive a refund due to him, his legal representative, trustee, guardian or receiver, as the case may be, may claim or receive it for the benefit of that person or his estate. It dovetails with the representative-assessee and legal-representative provisions of the Act (sections 159 to 167 and section 160 onwards), ensuring that the right to refund is not defeated by the disability or demise of the person entitled.
The section is essentially machinery, allocating the right to claim; it has generated little direct litigation. Its operation is governed by the substantive refund right in section 237 and by the general law on representative capacity and devolution of estates.
B. STATUTORY POSITION (verbatim text)
Reproduced from the local Act (base text to the Finance Act, 2025).
238. (1) Where the income of one person is included under any provision of this Act in the total income of any other person, the latter alone shall be entitled to a refund under this Chapter in respect of such income.
(1A) Where the value of fringe benefits provided or deemed to have been provided by one employer is included under any provisions of Chapter XII-H in the value of fringe benefits provided or deemed to have been provided by any other employer, the latter alone shall be entitled to a refund under this Chapter in respect of such fringe benefits.
(2) Where through death, incapacity, insolvency, liquidation or other cause, a person is unable to claim or receive any refund due to him, his legal representative or the trustee or guardian or receiver, as the case may be, shall be entitled to claim or receive such refund for the benefit of such person or his estate.
C. AUTHORITIES
Section 238 is a machinery provision allocating the right to claim a refund; there is little direct reported authority on it. The principle that the refund follows the person in whose hands the income is assessed flows from section 237 (above) and from the clubbing scheme; the representative-capacity rule in sub-section (2) is applied in line with the general law on legal representatives. Where a specific factual dispute arises (for example, competing claims between an estate and a third party), it is resolved on those general principles rather than on any gloss peculiar to section 238.
Substantive right and "due" refund (applied to the section 238 claimant)
The substantive right that section 238 channels to the specified claimant is that in section 237; the following decisions, though arising under sections 237/240/244A, supply the governing principles.
Union of India v. Tata Chemicals Ltd. (2014) 363 ITR 658 (SC)
Court: Supreme Court of India; judgment dated 26 February 2014 (2014) 363 ITR 658 / 363 ITR 658 (SC) (also 222 Taxman 225 / 267 CTR 89).
Facts: The assessee-deductor, on a reference under section 195(2), was directed to deduct tax on remittances to a non-resident. In appeal the CIT(A) held that reimbursement of expenses was not chargeable in the non-resident's hands; the tax deducted and deposited on that component thus became refundable to the deductor, which claimed interest on it.
Held: A tax refund due to a resident/deductor on excess tax deducted and deposited under section 195 must be refunded with interest under section 244A from the date of payment. The obligation to refund money received and retained without right carries with it the right to interest; "refund becomes due" the moment the State has no lawful authority to retain the sum. The Department's reliance on the absence of an express provision was rejected — section 244A is wide enough to cover the deductor's refund (the matter being governed by section 244A(1)(b) read with section 240).
Significance: The leading modern authority on the State's duty to pay interest on unauthorisedly retained tax. It anchors both the refund right (section 237/240) and the interest right (section 244A) and has been followed repeatedly, including by the Supreme Court in Universal Cables Ltd. v. CIT.
CIT v. Chittoor Electric Supply Corporation (SC)
Court: Supreme Court of India (as reported).
Facts: On appeal the matter was restored to the Assessing Officer to frame a fresh assessment; thereafter a refund was determined. The assessee claimed interest from the date of the first appellate order to the date of refund.
Held: No refund can be said to have become "due" while assessment proceedings are still pending; "when the assessment proceedings are still pending, it is idle to talk of any amount or any refund becoming due to the assessee in respect of that assessment year, particularly in the light of section 237." Where a fresh assessment has been directed (proviso (a) to section 240), the refund — and hence interest on it — becomes due only on the making of the fresh assessment, not from the date of the appellate order.
Significance: Establishes that the refund must first be "due" before any refund or interest can arise; it is the textual companion to proviso (a) of section 240 and to the "amount becomes due" language of sections 243, 244 and 244A.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced from the local Act (base text amended up to the Finance Act, 2025); the publisher's footnote apparatus and amendment-marker brackets have been removed, and three asterisks (***) denote words or a sub-section omitted by amendment and retained only to mark the omission. Finance Act, 2026 changes are flagged in the commentary. Citations are stated as reported. Where a section has not been the subject of a direct reported decision, that is stated candidly and the nearest governing authority or circular is given. This digest is for professional reference and is not legal advice.