Income-tax refund payable to assessee cannot be diverted in writ proceedings where title remains disputed.

A refund under section 240 of the Income-tax Act, 1961 is payable to the assessee from whom tax is found not due in appellate or other proceedings. Where a third party claims entitlement on the basis that the underlying property vested in it under nationalisation law, the Department is not required to resolve rival title claims before payment. If entitlement depends on disputed questions of fact, writ jurisdiction is inappropriate and the claimant must establish its rights in separate proceedings and seek recovery from the persons in possession.

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Issues: Whether the petitioner, claiming that the refund arose from property vested in it under the nationalisation law, could compel the Income-tax Department under article 226 to pay the refund to it instead of to the assessee-firm; and whether the Department had any statutory duty to determine rival claims to the refund before making payment.

Analysis: The refund under section 240 of the Income-tax Act, 1961 is payable to the assessee from whom tax was found not due as a result of appellate or other proceedings. The assessee in the present matter was the partnership firm, and the question whether that firm formed part of the undertaking vested in the petitioner was a disputed question of fact not fit for adjudication in writ proceedings. If the petitioner asserted rights over property forming part of the vested undertaking, the appropriate course was to establish that claim in proper proceedings and seek recovery from the persons in possession of such property. Section 32 of the Sick Textile Undertakings (Nationalisation) Act, 1974 also indicated that disputes over withheld property were to be pursued through appropriate legal action, not by directing the Income-tax Department to divert a statutory refund to a claimant other than the assessee.

Conclusion: The petitioner was not entitled to an directing the Income-tax Department to refund the tax amount to it, and no mandamus could issue in its favour.

Final Conclusion: The writ petition was misconceived because the statutory obligation to refund under the income-tax law ran in favour of the assessee-firm, while the petitioner's claim depended on unresolved title and possession issues to be worked out in separate proceedings.

Ratio Decidendi: A refund payable under section 240 of the Income-tax Act, 1961 must be made to the assessee, and a claimant asserting derivative rights over the underlying property cannot compel payment to itself through writ jurisdiction when entitlement depends on a disputed question of fact.

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