TurboTax allowed U.S. refund to be held. However refund instructions do not allow that option. Is the retention of refund allowed by TurboTax?

TurboTax does not receive any type of tax refund, federal or state.

You will need to clarify exactly what you mean stating the refund is being held.  Held by whom and why?

Yes, there is an option in the filling process to allocate the entire amount or a portion of this years refund for the following year.

If you have the 1040 tax return it will be posted to line 36 "Applied to your 20XX estimated taxes"

Unless you are referring to having your tax refund applied to next years taxes -

To add, change or delete a current year federal tax refund to next year's taxes before you file your tax return -

Click on Federal Taxes (Personal using Home and Business)
Click on Other Tax Situations
Under Additional Tax Payments
On Apply Refund to Next Year, click on the start or update button

Or enter apply federal refund to next year in the Search box located in the upper right of the program screen. Click on Jump to apply federal refund to next year

The amount applied to next years taxes will be shown on Form 1040 Line 36

What "refund instructions" do not allow that? 

To apply part or all of your Federal refund to next year go to

Federal Taxes Tab or Personal (H&B version)

Other Tax Situations

Additional Tax Payments

Apply Refund to Next Year - Click the Start or Update button

Yes, there is an option in the filling process to allocate the entire amount or a portion of this years refund for the following year.

If you have the 1040 tax return it will be posted to line 36 "Applied to your 20XX estimated taxes"