Microsoft does refund Xbox digital games however you must purchase the Xbox digital game through Microsoft to get the refund for the digital game through Microsoft.
If you bought the Xbox digital game through another retailer then you would have to go through the retailer you bought the digital game to get your refund.
But as long as you buy or bought the Xbox digital game through Microsoft then yes you can request a refund for the digital Xbox game that you downloaded and bought if you didn't like it.
I've had no problems getting a few refunds for a couple digital Xbox games that I bought directly through Microsoft but didn't like them so I requested a refund.