Section 245 l Set Off of Refunds Against
Tax Remaining Payable
[Corresponding To Section 45E Of the 1922 Act]

1254. Refunds are not to be adjusted against taxes kept in abeyance under section 220(7)

Section 49E of the 1922 Act and section 245 of the 1961 Act provided that the Income-tax Officer may adjust any refunds that may subsequently fall due to the assessee against any tax that is remaining payable by him. If the refunds, unconnected in any way with the foreign income, arise to the assessee in later years, and these are sought by the department to be adjusted against the taxes kept in abeyance under proviso to section 45 of the 1922 Act/section 220(7) of the 1961 Act, the adjustment would result in considerable hardship to the assessee. The assessee would in that case be made liable for meeting the tax liability on foreign income which he is prohibited from bringing into India. The adjustment of refund in such cases would cut at the root of the basic provisions of proviso to section 45 of the 1922 Act/section 220(7) of the 1961 Act. In order to mitigate hardship in such cases it has been decided that the refunds due to the assessee may not be adjusted against  the taxes kept in abeyance under section 45 (proviso)/section 220(7). This decision, however, will not apply to those cases where refunds have already been adjusted.

Circular : No. 3-D (LXXII-21), dated 29/31-1-1968.