Section 244 — Interest on Refund Where No Claim is Needed
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Status: Spent for current years. Section 244 (interest on a refund due under section 240, and on excess tax/penalty paid after 31 March 1975) does not apply in respect of any assessment for assessment year 1989-90 or any subsequent year (sub-section (3)); from that year interest is governed by section 244A.
FA 2026: No amendment by the Finance Act, 2026.
A. SECTION COMMENTARY
Section 244 dealt, under the pre-1989 scheme, with interest on refunds where the assessee did not have to make a claim. Sub-section (1) gave interest at fifteen per cent per annum where a refund due in pursuance of an order referred to in section 240 was not granted within three months. Sub-section (1A) gave interest, from the date of payment, on tax or penalty paid after 31 March 1975 pursuant to an order of assessment or penalty that was later found in appeal or other proceeding to be in excess. Sub-section (2) provided interest where a refund had been withheld under the former section 241.
By sub-section (3), the section does not apply to assessments for assessment year 1989-90 or any subsequent year; for those years section 244A is the sole charging provision for refund interest. Section 244 thus governs only the older years (and, through sub-section (1A), excess payments made after 31 March 1975 in respect of those years).
Section 244(1A) was the provision under which Sandvik Asia Ltd. v. CIT awarded compensation for an inordinate delay (twelve to seventeen years) in paying interest admittedly due. That decision has since been confined to its facts by the larger Bench in CIT v. Gujarat Fluoro Chemicals, which held that there is no general entitlement to interest-on-interest and that only the statutory interest may be claimed. Modi Industries remains the leading exposition of the section 214/243/244 architecture, and Chittoor Electric Supply governs when a refund (and interest on it) becomes "due".
Because the section is spent for current assessment years, its treatment is historical; the operative interest provision today is section 244A.
B. STATUTORY POSITION (verbatim text)
Reproduced from the local Act (base text to the Finance Act, 2025).
244. (1) Where a refund is due to the assessee in pursuance of an order referred to in section 240 and the Assessing Officer does not grant the refund within a period of three months from the end of the month in which such order is passed, the Central Government shall pay to the assessee simple interest at fifteen per cent per annum on the amount of refund due from the date immediately following the expiry of the period of three months aforesaid to the date on which the refund is granted.
(1A) Where the whole or any part of the refund referred to in sub-section
(1) is due to the assessee, as a result of any amount having been paid by him after the 31st day of March, 1975, in pursuance of any order of assessment or penalty and such amount or any part thereof having been found in appeal or other proceeding under this Act to be in excess of the amount which such assessee is liable to pay as tax or penalty, as the case may be, under this Act, the Central Government shall pay to such assessee simple interest at the rate specified in sub-section
(1) on the amount so found to be in excess from the date on which such amount was paid to the date on which the refund is granted :
Provided that where the amount so found to be in excess was paid in instalments, such interest shall be payable on the amount of each such instalment or any part of such instalment, which was in excess, from the date on which such instalment was paid to the date on which the refund is granted :
Provided further that no interest under this sub-section shall be payable for a period of one month from the date of the passing of the order in appeal or other proceeding :
Provided also that where any interest is payable to an assessee under this sub-section, no interest under sub-section
(1) shall be payable to him in respect of the amount so found to be in excess.
(2) Where a refund is withheld under the provisions of section 241, the Central Government shall pay interest at the aforesaid rate on the amount of refund ultimately determined to be due as a result of the appeal or further proceeding for the period commencing after the expiry of three months from the end of the month in which the order referred to in section 241 is passed to the date the refund is granted.
(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 244 is spent for assessment year 1989-90 onwards. Its principal legacy is that section 244(1A) was the provision applied in Sandvik Asia (now confined by Gujarat Fluoro Chemicals); Modi Industries explains the old architecture and Chittoor Electric Supply the "due" requirement.
1. Interest/compensation under section 244(1A) — and its later confinement
Sandvik Asia Ltd. v. CIT (2006) 280 ITR 643 (SC)
Court: Supreme Court of India; judgment dated 27 January 2006 (2006) 280 ITR 643 / 150 Taxman 591.
Held: Where the Revenue had delayed, for periods ranging from twelve to seventeen years, the payment of interest admittedly due to the assessee on refunds, the assessee was entitled to be compensated for that delay. The Court directed compensation measured by reference to the statutory rate.
Significance: Once widely cited for an "interest-on-interest" proposition, Sandvik Asia has since been expressly confined to its extraordinary facts by the larger Bench in CIT v. Gujarat Fluoro Chemicals (2014) 358 ITR 291 (SC), which held that it awarded compensation for egregious delay and did not create a general entitlement to interest on interest under section 244A. It must now be read subject to Gujarat Fluoro Chemicals.
Held: Under section 244A only the interest provided for by the statute may be claimed by an assessee from the Revenue, and no further interest on such statutory interest. The Court clarified that the decision in Sandvik Asia had been "misquoted and misinterpreted": Sandvik was a case of an inordinate delay (of a decade or more) in paying interest that was lawfully due, for which compensation was awarded; it did not lay down a general rule entitling an assessee to interest-on-interest. "We clarify that it is only that interest provided for under the statute which may be claimed by an assessee from the Revenue and no other interest on such statutory interest."
Significance: The controlling authority on the limits of section 244A. There is no compounding of interest; an assessee aggrieved by delay in paying the statutory interest itself must seek relief otherwise (Article 226), but cannot claim interest-on-interest as of right.
2. Old-scheme 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 244 — Interest on Refund Where No Claim is Needed
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Status: Spent for current years. Section 244 (interest on a refund due under section 240, and on excess tax/penalty paid after 31 March 1975) does not apply in respect of any assessment for assessment year 1989-90 or any subsequent year (sub-section (3)); from that year interest is governed by section 244A.
FA 2026: No amendment by the Finance Act, 2026.
A. SECTION COMMENTARY
Section 244 dealt, under the pre-1989 scheme, with interest on refunds where the assessee did not have to make a claim. Sub-section (1) gave interest at fifteen per cent per annum where a refund due in pursuance of an order referred to in section 240 was not granted within three months. Sub-section (1A) gave interest, from the date of payment, on tax or penalty paid after 31 March 1975 pursuant to an order of assessment or penalty that was later found in appeal or other proceeding to be in excess. Sub-section (2) provided interest where a refund had been withheld under the former section 241.
By sub-section (3), the section does not apply to assessments for assessment year 1989-90 or any subsequent year; for those years section 244A is the sole charging provision for refund interest. Section 244 thus governs only the older years (and, through sub-section (1A), excess payments made after 31 March 1975 in respect of those years).
Section 244(1A) was the provision under which Sandvik Asia Ltd. v. CIT awarded compensation for an inordinate delay (twelve to seventeen years) in paying interest admittedly due. That decision has since been confined to its facts by the larger Bench in CIT v. Gujarat Fluoro Chemicals, which held that there is no general entitlement to interest-on-interest and that only the statutory interest may be claimed. Modi Industries remains the leading exposition of the section 214/243/244 architecture, and Chittoor Electric Supply governs when a refund (and interest on it) becomes "due".
Because the section is spent for current assessment years, its treatment is historical; the operative interest provision today is section 244A.
B. STATUTORY POSITION (verbatim text)
Reproduced from the local Act (base text to the Finance Act, 2025).
244. (1) Where a refund is due to the assessee in pursuance of an order referred to in section 240 and the Assessing Officer does not grant the refund within a period of three months from the end of the month in which such order is passed, the Central Government shall pay to the assessee simple interest at fifteen per cent per annum on the amount of refund due from the date immediately following the expiry of the period of three months aforesaid to the date on which the refund is granted.
(1A) Where the whole or any part of the refund referred to in sub-section
(1) is due to the assessee, as a result of any amount having been paid by him after the 31st day of March, 1975, in pursuance of any order of assessment or penalty and such amount or any part thereof having been found in appeal or other proceeding under this Act to be in excess of the amount which such assessee is liable to pay as tax or penalty, as the case may be, under this Act, the Central Government shall pay to such assessee simple interest at the rate specified in sub-section
(1) on the amount so found to be in excess from the date on which such amount was paid to the date on which the refund is granted :
Provided that where the amount so found to be in excess was paid in instalments, such interest shall be payable on the amount of each such instalment or any part of such instalment, which was in excess, from the date on which such instalment was paid to the date on which the refund is granted :
Provided further that no interest under this sub-section shall be payable for a period of one month from the date of the passing of the order in appeal or other proceeding :
Provided also that where any interest is payable to an assessee under this sub-section, no interest under sub-section
(1) shall be payable to him in respect of the amount so found to be in excess.
(2) Where a refund is withheld under the provisions of section 241, the Central Government shall pay interest at the aforesaid rate on the amount of refund ultimately determined to be due as a result of the appeal or further proceeding for the period commencing after the expiry of three months from the end of the month in which the order referred to in section 241 is passed to the date the refund is granted.
(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 244 is spent for assessment year 1989-90 onwards. Its principal legacy is that section 244(1A) was the provision applied in Sandvik Asia (now confined by Gujarat Fluoro Chemicals); Modi Industries explains the old architecture and Chittoor Electric Supply the "due" requirement.
1. Interest/compensation under section 244(1A) — and its later confinement
Sandvik Asia Ltd. v. CIT (2006) 280 ITR 643 (SC)
Court: Supreme Court of India; judgment dated 27 January 2006 (2006) 280 ITR 643 / 150 Taxman 591.
Held: Where the Revenue had delayed, for periods ranging from twelve to seventeen years, the payment of interest admittedly due to the assessee on refunds, the assessee was entitled to be compensated for that delay. The Court directed compensation measured by reference to the statutory rate.
Significance: Once widely cited for an "interest-on-interest" proposition, Sandvik Asia has since been expressly confined to its extraordinary facts by the larger Bench in CIT v. Gujarat Fluoro Chemicals (2014) 358 ITR 291 (SC), which held that it awarded compensation for egregious delay and did not create a general entitlement to interest on interest under section 244A. It must now be read subject to Gujarat Fluoro Chemicals.
CIT v. Gujarat Fluoro Chemicals (2014) 358 ITR 291 (SC) — larger Bench
Court: Supreme Court of India; three-Judge (larger) Bench; judgment dated 26 February 2014 (2014) 358 ITR 291 / 1 SCC 743.
Held: Under section 244A only the interest provided for by the statute may be claimed by an assessee from the Revenue, and no further interest on such statutory interest. The Court clarified that the decision in Sandvik Asia had been "misquoted and misinterpreted": Sandvik was a case of an inordinate delay (of a decade or more) in paying interest that was lawfully due, for which compensation was awarded; it did not lay down a general rule entitling an assessee to interest-on-interest. "We clarify that it is only that interest provided for under the statute which may be claimed by an assessee from the Revenue and no other interest on such statutory interest."
Significance: The controlling authority on the limits of section 244A. There is no compounding of interest; an assessee aggrieved by delay in paying the statutory interest itself must seek relief otherwise (Article 226), but cannot claim interest-on-interest as of right.
2. Old-scheme 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.