Mumbai I-T dept to refund Rs 20,000 cr

The Mumbai income-tax (I-T) department is expected to issue refund orders to the tune of around Rs 20,000 crore in 2007-08.

"This amount includes the interest to be paid to assessees, both corporate and individuals," an official source said. Last year, the department paid tax refunds of around Rs 14,000 crore. Refunds are given to assessees if the tax demand is in excess of the actual tax obligation.

The increase was mainly on account of heavy demand raised by the department last year since the assessments were made time-barring since December 2006, as against March 31 in line with the closing of the financial year, the official added.

At the same time, the targets have been revised upwards in the third quarter of 2006-07 following the buoyant collection of advance taxes. According to the revised targets, it is envisaged that the department will collect Rs 2,30,000 crore as against the previous target of Rs 2,05,000 crore.

This is in contrast to the collection made last year (Rs 1,64,000 crore) as against the proposed collection target of Rs 1,73,000 crore.

Consequently, the target for the highest revenue collection centre, Mumbai, alone got hiked by Rs 10,000 crore from Rs 69,000 crore to Rs 79,000 crore.

In a recent circular issued by the Central Board of Direct Taxes, income-tax authorities have been directed to pay additional interest if the interest on refund to be paid to the assessee is wrongfully retained by the department.

This follows the recent Supreme Court order which is based on the judgement of the Gujarat High Court in the matter of Sandvik Asia. Generally, an assessee is entitled to receive interest on the amount of refund. The board has specified that interest is to be granted simultaneously with the refund. The payment of interest on refund is under Section 244A of the Income-Tax Act.

Usually, it has been observed that the payment of interest on refund gets delayed and at times, the refund also gets delayed for a very long time.