I-T dept holds back Rs 20,000 crore in tax refunds to private, PSU firms

High-value refunds of corporates, public sector undertakings likely to be issued in April

The income-tax (I-T) department has decided not to release many high-value refunds claimed by corporates and public sector units for the financial year 2016-17, citing reasons such as discrepancies in the credit of tax deducted at source (TDS), carry forward losses, and pending tax demand for the previous years, said two sources privy to the development.

Refund claims amounting to about Rs 20,000 crore would be held back until the respective issues were resolved, the sources said. The amount makes up 1.7 per cent of the Budget estimate of direct tax collection at Rs 11.5 trillion for the current financial year. 

“We have received communication from the I-T department regarding the mismatch in TDS credit. The issue is pending, and until it is settled, the department may not pay the claims,” said a chartered accountant whose client’s refund has been put on hold.

Sources in the department say refund claims of Rs 100 crore and above might be issued in the first week of April. It is learnt that a large state-run company has claimed a refund of Rs 6,000 crore. However, the details of the case could not ascertained.

The I-T department is also expediting the transfer pricing cases involving international transactions where assessees have approached the dispute resolution panel. Such cases are expected to be resolved by mid-February. About 175 cases where tax demand was in the range of Rs 150 crore and Rs 300 crore are with the panel. According to I-T rules, once a directive is issued by the panel, an assessing officer confirms the tax demand order, without providing an opportunity to the assessee to be heard. However, the assessee can approach the appellate court later.

The department is also intensifying search and survey operations for recovery of arrears, prosecution of wilful defaulters, verification of TDS, and payment of dividend distribution tax, in an attempt to achieve the fiscal deficit target of 3.3 per cent of GDP. The move comes after Central Board of Direct Taxes (CBDT) Chairman Sushil Chandra raised serious concerns over growth of direct tax collection.

Struggling to meet the fiscal deficit target, the government has pinned hopes on direct tax collection to meet the shortfall expected from goods and services tax collection and non-tax revenues. 

However, even on the direct tax front, the growth rate of collections was just 13.6 per cent during April-December 2018-19, against the Budget target of 14.7 per cent for the entire year. 

On Wednesday, the CBDT chief had a video-conferencing with tax officials to discuss measures to achieve the collection target.

Explaining the rationale behind holding back big refunds, a tax source said there were certain claims that needed proper verification. These issues typically arise due to a mismatch in the credit of TDS as claimed in the tax returns by an entity. In such cases, a demand for payment of the differential amount can be raised by the tax officer. Refunds can be also halted if there are discrepancies in carry forward losses. According to the rule, an entity can carry forward the losses up to eight years, and later these can be adjusted with the income in the books.

Taxing times

• I-T dept identifies high-value tax refund claims of 2016-17 
   
• Shows mismatch in TDS credit; pending previous years' demands require verification
   
• Expedites transfer pricing cases involving international transaction
   
• About 175 cases with tax demand in range of Rs 150-300 crore pending with resolution panel 
   
• Expedites survey operation to recover tax arrears and current year tax demand
   
• To file prosecution against wilful defaulters