Refund reduction by refusing interest on refund makes a rectification order appealable under the Income-tax Act.

An order under section 154 of the Income-tax Act refusing interest on a refund was treated as an order reducing the refund because the denial of interest diminished the amount actually refundable to the assessee. On that footing, the rectification order fell within the appellate scope of section 246(1)(f) and was therefore appealable. The question was answered in the affirmative in favour of the assessee.

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Issues: Whether an order passed under section 154 of the Income-tax Act, 1961, refusing interest on refund due to an assessee had the effect of reducing the refund so as to be appealable under section 246(1)(f) of the Act.

Analysis: An order under section 246(1)(f) is appealable where a rectification under section 154 has the effect of reducing a refund. The refusal to grant interest on the refund payable necessarily diminished the amount actually refundable to the assessee. The order was therefore treated as one reducing the refund and falling within the scope of the appellate provision.

Conclusion: The order under section 154 was appealable under section 246(1)(f); the question was answered in the affirmative in favour of the assessee.

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