Refund Entitlement in Special Cases (Death, Incapacity, Insolvency, Liquidation, or Other Causes) : Clause 432 of the Income Tax Bill, 2025 and Section 238 of the Income-tax Act, 1961

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....aiming a refund. These provisions are critical in ensuring that the right to tax refunds is not lost due to technicalities or extraordinary situations such as death, incapacity, or insolvency. This commentary provides an in-depth analysis of Clause 432, its objectives, detailed provisions, practical implications, and a comparative assessment with the existing Section 238, highlighting similarities, differences, and the legislative intent behind any changes. Objective and Purpose The primary objective of both Clause 432 and Section 238 is to ensure that the mechanism for claiming tax refunds remains robust, equitable, and accessible, even in exceptional circumstances. These provisions aim to: * Prevent unjust enrichment by ensuring the c....

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.... bears the tax liability on the clubbed income is also the beneficiary of any refund, thereby maintaining consistency and preventing double recovery or denial of refund. 2. Clause 432(2): Refunds in Cases of Death, Incapacity, Insolvency, Liquidation, or Other Causes Clause 432(2) states: "Where a person is unable to claim or receive a refund due to him on account of death, incapacity, insolvency, liquidation or other cause, his legal representative or the trustee or guardian or receiver, shall be entitled to claim or receive such refund for the benefit of such person or his estate." This provision is designed to address situations where the taxpayer is unable to act due to death or legal incapacity, or where the taxpayer's assets a....

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....enerally governed by other provisions of the Act. Comparative Analysis with Section 238 of the Income-tax Act, 1961 1. Structure and Language Both provisions are similarly structured, with two main sub-clauses addressing: * Entitlement to refund in cases of clubbing of income. * Entitlement to refund in cases of death, incapacity, insolvency, liquidation, or other incapacity. The language of Clause 432 is more streamlined and modernized, reflecting contemporary legislative drafting standards. 2. Coverage of Fringe Benefits (Section 238(1A) vs. Clause 432) A significant difference is the presence of Section 238(1A) in the 1961 Act: "Where the value of fringe benefits provided or deemed to have been provided by one employer is incl....

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....tailed procedures for claims by legal representatives or others. However, established practice under the 1961 Act requires submission of proof of authority (such as succession certificates, court orders, or powers of attorney) to the tax authorities. It is expected that similar procedures will be prescribed by rules under the 2025 Bill. 6. Legislative Intent and Policy Continuity The core legislative intent remains unchanged: to ensure that the right to a refund is preserved and can be exercised by the appropriate person, even in special or exceptional circumstances. The updating of the provision in the 2025 Bill reflects a policy of legislative clarity and removal of obsolete references (such as FBT), without altering the substantive rig....