Assessment remand does not create an immediate refund or statutory interest claim until liability is recomputed.

Section 240 applies only when an appellate or other order makes a refund due, and section 244(1) applies only if that refund is not granted within the prescribed time. Where an assessment is set aside and remanded for fresh determination, the original demand is not automatically extinguished, because the tax liability is still to be recomputed on remand. On that basis, no refund arose merely from the remand and statutory interest under section 244(1) was not payable until fresh assessment established any excess payment. The assessee therefore had no enforceable claim to interest on the amount paid under the original demand before redetermination of liability.

---

---

Issues: Whether interest under section 244(1) of the Income-tax Act, 1961 was payable when original assessment orders were set aside and remanded for fresh consideration, and whether such remand made the tax paid under the original demand refundable under section 240 of the Income-tax Act, 1961.

Analysis: Section 240 applies where, as a result of an appellate or other order under the Act, a refund becomes due. Section 244(1) is attracted only when a refund is due in pursuance of such an order and is not granted within the prescribed period. The legislative effect of section 3 of the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964 is that a notice of demand is not rendered ineffective merely because of appellate reduction of tax. On the same principle, when an assessment is set aside and remanded for fresh determination, the original demand is not automatically wiped out so as to create an immediate refund obligation. The purpose of remand is recalculation of liability, and any refund can arise only after fresh assessment determines the excess, if any.

Conclusion: No refund became due merely because the assessment orders were remanded, and interest under section 244(1) was not payable before fresh assessment.

Final Conclusion: The assessee had no enforceable claim to interest on the tax paid under the original demand until the liability was redetermined on remand; the challenge to the refusal of interest failed.

Ratio Decidendi: Where an assessment is set aside and remanded for fresh determination, the original notice of demand continues to operate until the tax liability is finally recomputed, and no refund or statutory interest arises merely from the remand.

---