Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Status: Spent for current years. Section 243 (interest where the Assessing Officer delays granting a refund) does not apply in respect of any assessment for assessment year 1989-90 or any subsequent year (sub-section (3)); for those years interest is governed exclusively by section 244A.
FA 2026: No amendment by the Finance Act, 2026.
A. SECTION COMMENTARY
Section 243 provided, under the pre-1989 scheme, for interest at fifteen per cent per annum where the Assessing Officer failed to grant a refund within three months — computed, in the general case, from the end of the month in which the total income was determined, and, in other cases, from the end of the month in which the refund claim was made. Delay attributable to the assessee was to be excluded, and disputes as to the excludable period were to be decided by the senior income-tax authority named in sub-section (2).
By sub-section (3), the section does not apply to any assessment for assessment year 1989-90 or any subsequent year. From that year, interest on refunds is governed solely by section 244A, which the Amending Act, 1987 inserted in lieu of the former sections 214, 243 and 244 (see CBDT Circular No. 549 dated 31 October 1989). Section 243 therefore operates, if at all, only for assessment years up to and including 1988-89.
The governing principle, common to the old and the new regimes, is that interest runs only on an amount that has become "due" as a refund. As the Supreme Court held in the Chittoor Electric Supply matter, while assessment proceedings remain pending no refund is due, and no interest can run until the refund crystallises. Modi Industries works out, for the old scheme, the periods and amounts on which interest was payable.
Given that the section is spent for all current assessment years, its treatment here is historical; the live law on refund interest is in section 244A.
B. STATUTORY POSITION (verbatim text)
Reproduced from the local Act (base text to the Finance Act, 2025).
243. (1) If the Assessing Officer does not grant the refund,—
(a) in any case where the total income of the assessee does not consist solely of income from interest on securities or dividends, within three months from the end of the month in which the total income is determined under this Act, and
(b) in any other case, within three months from the end of the month in which the claim for refund is made under this Chapter, the Central Government shall pay the assessee simple interest at fifteen per cent per annum on the amount directed to be refunded from the date immediately following the expiry of the period of three months aforesaid to the date of the order granting the refund.
Explanation.—If the delay in granting the refund within the period of three months aforesaid is attributable to the assessee, whether wholly or in part, the period of the delay attributable to him shall be excluded from the period for which interest is payable.
(2) Where any question arises as to the period to be excluded for the purposes of calculation of interest under the provisions of this section, such question shall be determined by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner whose decision shall be final.
(3) The provisions of this section shall not apply in respect of any assessment for the assessment year commencing on the 1st day of April, 1989 or any subsequent assessment years.
C. AUTHORITIES
Section 243 is spent for assessment year 1989-90 onwards (replaced by section 244A); the candour/historical rule applies. The principles — interest only on a refund actually "due", and the architecture of the old interest scheme — are those in Chittoor Electric Supply and Modi Industries.
Old-scheme interest architecture and the "due" requirement
Modi Industries Ltd. v. CIT (1995) 216 ITR 759 (SC)
Court: Supreme Court of India; three-Judge Bench; judgment dated 15 September 1995 (1995) 216 ITR 759 / 82 Taxman 377.
Held: A leading exposition of the pre-1989 interest-on-refund scheme (sections 214, 243 and 244) and the meaning of "regular assessment". The Court worked out the periods for which, and the amounts on which, interest on advance tax and on excess tax was payable, and held that the right to a refund of tax realised in excess of the tax ultimately found payable arises, and interest runs, with reference to the relevant statutory dates rather than from each successive appellate order.
Significance: The foundational authority on the architecture of refund interest under the old sections 214/243/244; though those sections do not apply from assessment year 1989-90 (section 244A having replaced them), Modi Industries remains the reference point for the principles later carried into section 244A and for assessments up to 1988-89.
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 243 — Interest on Delayed Refunds
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Status: Spent for current years. Section 243 (interest where the Assessing Officer delays granting a refund) does not apply in respect of any assessment for assessment year 1989-90 or any subsequent year (sub-section (3)); for those years interest is governed exclusively by section 244A.
FA 2026: No amendment by the Finance Act, 2026.
A. SECTION COMMENTARY
Section 243 provided, under the pre-1989 scheme, for interest at fifteen per cent per annum where the Assessing Officer failed to grant a refund within three months — computed, in the general case, from the end of the month in which the total income was determined, and, in other cases, from the end of the month in which the refund claim was made. Delay attributable to the assessee was to be excluded, and disputes as to the excludable period were to be decided by the senior income-tax authority named in sub-section (2).
By sub-section (3), the section does not apply to any assessment for assessment year 1989-90 or any subsequent year. From that year, interest on refunds is governed solely by section 244A, which the Amending Act, 1987 inserted in lieu of the former sections 214, 243 and 244 (see CBDT Circular No. 549 dated 31 October 1989). Section 243 therefore operates, if at all, only for assessment years up to and including 1988-89.
The governing principle, common to the old and the new regimes, is that interest runs only on an amount that has become "due" as a refund. As the Supreme Court held in the Chittoor Electric Supply matter, while assessment proceedings remain pending no refund is due, and no interest can run until the refund crystallises. Modi Industries works out, for the old scheme, the periods and amounts on which interest was payable.
Given that the section is spent for all current assessment years, its treatment here is historical; the live law on refund interest is in section 244A.
B. STATUTORY POSITION (verbatim text)
Reproduced from the local Act (base text to the Finance Act, 2025).
243. (1) If the Assessing Officer does not grant the refund,—
(a) in any case where the total income of the assessee does not consist solely of income from interest on securities or dividends, within three months from the end of the month in which the total income is determined under this Act, and
(b) in any other case, within three months from the end of the month in which the claim for refund is made under this Chapter, the Central Government shall pay the assessee simple interest at fifteen per cent per annum on the amount directed to be refunded from the date immediately following the expiry of the period of three months aforesaid to the date of the order granting the refund.
Explanation.—If the delay in granting the refund within the period of three months aforesaid is attributable to the assessee, whether wholly or in part, the period of the delay attributable to him shall be excluded from the period for which interest is payable.
(2) Where any question arises as to the period to be excluded for the purposes of calculation of interest under the provisions of this section, such question shall be determined by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner whose decision shall be final.
(3) The provisions of this section shall not apply in respect of any assessment for the assessment year commencing on the 1st day of April, 1989 or any subsequent assessment years.
C. AUTHORITIES
Section 243 is spent for assessment year 1989-90 onwards (replaced by section 244A); the candour/historical rule applies. The principles — interest only on a refund actually "due", and the architecture of the old interest scheme — are those in Chittoor Electric Supply and Modi Industries.
Old-scheme interest architecture and the "due" requirement
Modi Industries Ltd. v. CIT (1995) 216 ITR 759 (SC)
Court: Supreme Court of India; three-Judge Bench; judgment dated 15 September 1995 (1995) 216 ITR 759 / 82 Taxman 377.
Held: A leading exposition of the pre-1989 interest-on-refund scheme (sections 214, 243 and 244) and the meaning of "regular assessment". The Court worked out the periods for which, and the amounts on which, interest on advance tax and on excess tax was payable, and held that the right to a refund of tax realised in excess of the tax ultimately found payable arises, and interest runs, with reference to the relevant statutory dates rather than from each successive appellate order.
Significance: The foundational authority on the architecture of refund interest under the old sections 214/243/244; though those sections do not apply from assessment year 1989-90 (section 244A having replaced them), Modi Industries remains the reference point for the principles later carried into section 244A and for assessments up to 1988-89.
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.