The refund of tax is a mandate of law. When a refund is called for, interest has to be paid as interest is compensatory in nature. It always moves with the principle amount. However, the assessee is not entitled to interest on interest in view of the ratio laid down by the Hon'ble Supreme Court in the case of CIT vs. Gujarat Fluoro Chemicals 358 ITR 291 (SC).
- Assessee is beneficiary of specific family trust
- Assessment u/s 143(3) was done on protective basis as the income was assessed to tax on substantive basis in the case of main Trust
- Matter of main trust was pending with appellate authorities
- Main trust settled the dispute under KVSS
- In view of this the income in the hands of this present Trusts were deleted by the AO under section 16(5) of the Act vide order dated 28/11/2000 passed under section 155 of the Act and income of the assessee was computed at Nil.
- A.O. allowed refund without interest u/s 244A
- Assessee made application u/s 154 to grant the interest which was rejected by the AO as well by the CIT(A)
- Assessee moved to the Tribunal for interest as well as interest on interest.
- Revenue argued that the delay in the refund was caused because of the conduct of the assesses
- Tribunal allowed Interest on refund u/s 244A but denied interest on interest
- Appeal partly allowed in favour of assessee
1. The issue regarding grant of interest to the assessees is clearly covered by the decision of the Special Bench as well as Hon’ble Gujarat High Court which have not been contended to be reversed or modified. Therefore, we direct the Revenue to grant the interest to the assessee.
2. Assessee is not entitled to interest on interest in view of the ratio laid down by the Hon'ble Supreme Court in the case of CIT vs. Gujarat Fluoro Chemicals 358 ITR 291 (SC)
Case Referred to
Saurashtra Cement & Chemical Industries vs. ITO 194 PER 659