Refund of excess TDS on non-accrued interest upheld where the deductee confirmed no entitlement to the underlying interest.

Tax deducted at source on interest that had never accrued to the deductee was treated as refundable to the assessee where the deductee confirmed non-accrual and raised no objection to refund. The Court relied on Circular No. 285 dated 21 October 1980, which permits refund of excess TDS payments and remained valid and subsisting. On those facts, refusal of refund could not stand, and the assessee was held entitled to refund of the TDS amounts paid for the relevant assessment years.

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Issues: Whether tax deducted at source and deposited by the assessee on interest that never accrued to the deductee could be refunded to the assessee.

Analysis: The deductee confirmed that the interest component had never accrued to it and had no objection to refund of the TDS amount to the assessee. The Court also noted that Circular No. 285 dated 21st October, 1980 permitting refund of excess TDS payments remained valid and subsisting. On these facts, the impugned refusal to grant refund could not stand.

Conclusion: The assessee was held entitled to refund of the TDS amounts paid for the relevant assessment years.

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