19 August 2022
Refund of grossed up tax on non taxable payments

The Finance Act 2022 has introduced Section 239A in the Income Tax Act, 1961 (the Act). As per the said provision, a person who has borne and paid the tax deductible under an agreement or other arrangement in writing can, within 30 days from the date of payment of such tax to the credit of the Central Government, file an application with the jurisdictional Assessing Officer (AO). The said application can be filed if the person claims that no tax was deductible on such item of income. The said application can be made only if the tax is deductible on payments made to non-residents or foreign companies and pertains to income other than income in the form of interest.

After the receipt of the application, the AO is required to pass an order within six months from the end of the month in which the application was received. The AO can either reject or accept the application after making necessary inquiries as he considers fit.

The Central Board of Direct Taxes (CBDT) has notified Form 29D for making the application for refund of tax paid on grossing up. The application can be presented by the claimant or through a duly authorized agent. The copy of the agreement or other arrangement is to be accompanied by the application in Form 29D. The claimant has to furnish basic details of:
  1. Deductor and Deductee
  2. Details of the agreement/arrangement
  3. Transaction on which tax is not deductible
  4. Details of tax deposited
  5. Brief description as to why tax is not deductible on the transaction under consideration
  6. Details of the refund received in the past three years for similar transactions, if any, including the Commissioner of Income Tax Appeals' [CIT(A)] order.
It is important to note that earlier, the claimant was required to file an appeal before the CIT(A) to claim such a refund. The process of filing an appeal has been withdrawn from 1 April 2022.
Our Comments
Since the process of filing an appeal has been discontinued since 1 April 2022 and the Form for claiming the refund has been notified recently (17 August 2022), hence, the limitation of 30 days cannot be adhered to. Considering the above, the claimants may be allowed to file the refund application for the taxes paid between 1 April 2022 and till date, irrespective of the fact that 30 days have already passed after making the payment of taxes.
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