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Press Release with reference to news report on excess tax refund.
March, 04th 2014
                                Government of India
                                 Ministry of Finance
                              Department of Revenue
                            Central Board of Direct Taxes

                                                             Dated 8th February, 2014

                                         Press Release

       This is with reference to the news report appearing in The Hindu, Delhi on
8.2.2014 with the headline "Finance Ministry pays Rs.37, 365 cr. in interest on excess
tax refund" and similar reports in some other newspapers. The emphasis of the reports
is that huge interest was paid by the Government on refund of excess taxes during
2006-2007 to 2010-2011 and that as per PAC report of January 31, 2014; such interest
is without the authorisation of Parliament.







2.     These news reports have not taken into consideration the fact that the rate of
interest and entitlement to interest on excess taxes are determined by the statutory
provisions of the Income Tax Act, enacted by the Parliament. Interest payment is a
statutory obligation and nondiscretionary in nature, which during 2006-2007 to 2010-
2011 constituted 14.5% of refund. Such interest payment aggregated to Rs.21263 crore
during 2001-2002 to 2005-2006, constituting 20.79% of refunds.


3.     Government has been of the view that non reflection of interest on refund
separately as expenditure in the Annual financial statement laid before both the houses
of the Parliament did not violate any constitutional provision. It may also be clarified that
the practice of not seeking specific appropriation for interest on refund as expenditure
and treating it as reduction from gross tax revenue, has been consistently followed
since the Income Tax Act came into force in 1961, with an exception in Budget Estimate
(BE) for F.Y. 2001-2002, where estimated interest was separately shown as
expenditure . However, in the Revised Estimate for the same year (as presented in the
Budget for F.Y 2002-2003), the interest was reduced to nil. No BE for such interest was
given in the Budgets for F.Y 2002-2003 onwards. The learned Attorney General for
India in his opinion dated 6.5.2013 also affirmed that refund on excess tax is not an
expenditure under Article 112(1) of the Constitution and such outgo cannot be
considered with other operational expenses.
4. The Report of PAC dated 31.1.2014 was laid in Parliament on 6.2.2014 and the recommendations and observations of the Committee will receive due consideration and responded to within 6 months of the presentation, as per the requirement of the Committee. (Rekha Shukla) Commissioner of Income Tax (M&TP) Official Spokesperson, CBDT
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