The department paid my s.244A interest years late. Can I claim interest on that delayed interest?
The Gujarat High Court said no, and answered the question in favour of the Revenue. Applying the Supreme Court's clarification in CIT v. Gujarat Fluoro Chemicals, it held that since Parliament inserted s.244A to provide for interest on refunds, it is only that statutory interest that an assessee may claim from the Revenue, and no other interest on such statutory interest.
Decided by the High Court (K.S. Jhaveri J and G.R. Udhwani J) on 2016-06-21, reported as Tax Appeal No. 674 of 2007 with Tax Appeal No. 675 of 2007 (High Court of Gujarat at Ahmedabad); oral judgment. It bears on section 244A, section 154 of the Income Tax Act 1961, in Refunds, Interest & Condonation, How Tax Law Is Read and Demand, Recovery & Stay matters.
This is the flat answer that assessing officers and Commissioners give, and it is the answer a practitioner must expect. But it is not the whole of the law and this entry should be read against the other side. The Karnataka High Court in CIT v. Syndicate Bank (7 October 2020) reached the opposite practical result on a different analysis: following the three-Judge Bench in CIT v. HEG Ltd., it held that the interest component partakes of the character of the 'amount' due under s.244A, so a refund order that omits the interest due leaves the Revenue liable to pay interest on the shortfall, and said in terms that this does not amount to interest on interest. The question is therefore genuinely contested, and how it is framed decides it: a claim pleaded as 'interest on interest' will meet this judgment, while a claim pleaded as a short refund of the 'amount due' under s.244A engages the other line. Note also that the assessee's counsel here conceded he could point to no contrary decision, so the Court gave no elaborate reasons of its own.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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For assessment years 1995-96 and 1996-97 the assessee claimed interest on the interest due and granted to it under s.244A. The Assessing Officer refused the claim in an order under s.154 and the Commissioner (Appeals) upheld that refusal. The Tribunal, by order dated 6 September 2006 in ITA Nos. 2348/Ahd/2004 and 2349/Ahd/2004, dismissed the assessee's appeals and confirmed the Commissioner (Appeals). The matter came to the High Court on the substantial question whether the Tribunal was right in not granting interest on delayed payment of interest. Counsel for the Revenue relied on the Supreme Court's decision in CIT v. Gujarat Fluoro Chemicals (2013) 358 ITR 291 (SC); counsel for the assessee was not in a position to dispute it or to point to any contrary decision.
The question was answered in favour of the Revenue and the tax appeals were dismissed, the Tribunal's order being confirmed. Because Parliament inserted s.244A to provide for interest on refunds in various contingencies, it is only that interest provided for under the statute which may be claimed by an assessee from the Revenue, and no other interest on such statutory interest (paras 5 and 6).
The Court took the issue to be no longer res integra in view of CIT v. Gujarat Fluoro Chemicals, which it reproduced. In that decision the Supreme Court had explained that Sandvik Asia had been misquoted and misinterpreted by assessees and by the Revenue alike as directing payment of interest on statutory interest; that what Sandvik Asia decided was whether an assessee made to wait for a refund of interest for decades should be compensated for the prejudice caused by the delay, and that the direction there was to pay compensation and not interest on interest; and that since the Legislature had by Act No. 4 of 1988 with effect from 1 April 1989 inserted s.244A providing for interest on refunds in various contingencies, it is only that statutory interest which may be claimed and no other interest on it. Adopting that clarification, and recording that the assessee could point to no contrary decision, the Court declined to give elaborate reasons of its own and answered the question against the assessee (paras 3 to 6).
it is held by Honble the Supreme Court that the Legislature inserted Section 244A to the Act which provides for interest on refunds under various contingencies and that it is only that interest provided for under the statute which may be claimed by an assessee from the Revenue and no other interest on such statutory interest.
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Handle my notice → Ask a CA on WhatsAppThe Gujarat High Court said no, and answered the question in favour of the Revenue. Applying the Supreme Court's clarification in CIT v. Gujarat Fluoro Chemicals, it held that since Parliament inserted s.244A to provide for interest on refunds, it is only that statutory interest that an assessee may claim from the Revenue, and no other interest on such statutory interest. This was decided by the High Court (K.S. Jhaveri J and G.R. Udhwani J) and bears on section 244A, section 154 of the Income Tax Act 1961. It is reported as Tax Appeal No. 674 of 2007 with Tax Appeal No. 675 of 2007 (High Court of Gujarat at Ahmedabad); oral judgment. This is the flat answer that assessing officers and Commissioners give, and it is the answer a practitioner must expect. But it is not the whole of the law and this entry should be read against the other side. The Karnataka High Court in CIT v. Syndicate Bank (7 October 2020) reached the opposite practical result on a different analysis: following the three-Judge Bench in CIT v. HEG Ltd., it held that the interest component partakes of the character of the 'amount' due under s.244A, so a refund order that omits the interest due leaves the Revenue liable to pay interest on the shortfall, and said in terms that this does not amount to interest on interest. The question is therefore genuinely contested, and how it is framed decides it: a claim pleaded as 'interest on interest' will meet this judgment, while a claim pleaded as a short refund of the 'amount due' under s.244A engages the other line. Note also that the assessee's counsel here conceded he could point to no contrary decision, so the Court gave no elaborate reasons of its own. If it applies to you, the first step is this: Never plead the claim as 'interest on interest'. Plead that the refund actually granted fell short of the 'amount due' under s.244A because it omitted the interest element, and claim s.244A interest on that shortfall.
For assessment years 1995-96 and 1996-97 the assessee claimed interest on the interest due and granted to it under s.244A. The Assessing Officer refused the claim in an order under s.154 and the Commissioner (Appeals) upheld that refusal. The Tribunal, by order dated 6 September 2006 in ITA Nos. 2348/Ahd/2004 and 2349/Ahd/2004, dismissed the assessee's appeals and confirmed the Commissioner (Appeals). The matter came to the High Court on the substantial question whether the Tribunal was right in not granting interest on delayed payment of interest. Counsel for the Revenue relied on the Supreme Court's decision in CIT v. Gujarat Fluoro Chemicals (2013) 358 ITR 291 (SC); counsel for the assessee was not in a position to dispute it or to point to any contrary decision. The matter was decided on 2016-06-21 by the High Court (K.S. Jhaveri J and G.R. Udhwani J). On those facts the High Court held as follows. The question was answered in favour of the Revenue and the tax appeals were dismissed, the Tribunal's order being confirmed. Because Parliament inserted s.244A to provide for interest on refunds in various contingencies, it is only that interest provided for under the statute which may be claimed by an assessee from the Revenue, and no other interest on such statutory interest (paras 5 and 6).
The Court took the issue to be no longer res integra in view of CIT v. Gujarat Fluoro Chemicals, which it reproduced. In that decision the Supreme Court had explained that Sandvik Asia had been misquoted and misinterpreted by assessees and by the Revenue alike as directing payment of interest on statutory interest; that what Sandvik Asia decided was whether an assessee made to wait for a refund of interest for decades should be compensated for the prejudice caused by the delay, and that the direction there was to pay compensation and not interest on interest; and that since the Legislature had by Act No. 4 of 1988 with effect from 1 April 1989 inserted s.244A providing for interest on refunds in various contingencies, it is only that statutory interest which may be claimed and no other interest on it. Adopting that clarification, and recording that the assessee could point to no contrary decision, the Court declined to give elaborate reasons of its own and answered the question against the assessee (paras 3 to 6). In the words reproduced by the source cited on this page: "it is held by Honble the Supreme Court that the Legislature inserted Section 244A to the Act which provides for interest on refunds under various contingencies and that it is only that interest provided for under the statute which may be claimed by an assessee from the Revenue and no other interest on such statutory interest." The decision followed or applied CIT v. Gujarat Fluoro Chemicals (2013) 358 ITR 291 (SC) — followed; Sandvik Asia Ltd. v. CIT (2006) 280 ITR 643 (SC) — explained through Gujarat Fluoro Chemicals.
It was decided by the High Court on 2016-06-21 and is reported as Tax Appeal No. 674 of 2007 with Tax Appeal No. 675 of 2007 (High Court of Gujarat at Ahmedabad); oral judgment. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 244A, section 154, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the department, and it appears in this library for that reason — you need to know what the Assessing Officer will cite against you. The question was answered in favour of the Revenue and the tax appeals were dismissed, the Tribunal's order being confirmed. Because Parliament inserted s.244A to provide for interest on refunds in various contingencies, it is only that interest provided for under the statute which may be claimed by an assessee from the Revenue, and no other interest on such statutory interest (paras 5 and 6). It arises in Refunds, Interest & Condonation, How Tax Law Is Read and Demand, Recovery & Stay matters, on section 244A, section 154 of the Income Tax Act 1961, and was decided by K.S. Jhaveri J and G.R. Udhwani J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Compute the shortfall arithmetically: total amount due (tax plus s.244A interest to the date of the earlier refund) less the amount actually paid, and run s.244A on the difference. Cite CIT v. HEG Ltd. and CIT v. Syndicate Bank on that framing, and be ready for the Revenue to answer with this judgment and with CIT v. Gujarat Fluoro Chemicals. Where the delay is inordinate and the money was withheld without authority of law, consider a writ petition seeking compensation rather than statutory interest — that is what Sandvik Asia was, on the Supreme Court's own later explanation, and it is a different remedy from a s.244A claim. Check whether s.244A(1A) applies instead: where the refund arises out of an appellate order, the additional three per cent is a statutory entitlement and needs no argument about interest on interest.
Searched for later treatment; none was found. That is not the same as a source affirming it. No decision applying, affirming, overruling or doubting this oral judgment has been found, and no Supreme Court challenge to it is traceable. Two decisions surface under the name and neither is treatment of it. In Iron Build Systems Private Limited v ACIT (Gujarat High Court, 14 July 2026) what senior counsel cited at para 14 was a different and much earlier decision, Gujarat State Fertilizers & Chemical Ltd v CIT (2006) 283 ITR 149, and it was cited on condonation of delay rather than on section 244A. A later admission order of the same Court in the same assessee's case (25 June 2019) frames a question on the taxability of section 244A interest for assessment year 2011-12, but it does not refer to this judgment and decides nothing on merits. So the judgment has attracted no citable following. A practitioner should treat the point as governed by the Supreme Court authority this judgment itself rests on — CIT v. Gujarat Fluoro Chemicals — rather than by this disposal. And the point is not closed. The Karnataka High Court in CIT v. Syndicate Bank (7 October 2020), following the three-Judge Bench in CIT v. HEG Ltd., holds that the interest component partakes of the character of the 'amount' due under s.244A, so that a refund order which omits the interest due leaves the Revenue liable to pay interest on the shortfall — and says in terms that this is not interest on interest. Neither of those decisions was cited to this Court. How the claim is framed therefore decides it, and the why-it-matters note and the what-to-do steps set out the framing that engages the other line. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
One oddity in the cause title and in paragraph 1 should be resolved before the judgment is cited, because it makes the outcome look the wrong way round. The cause title names Gujarat State Fertilisers & Chemicals Ltd as the appellant. Paragraph 1, however, records that 'the revenue has preferred the present Tax Appeals', and paragraph 6 dismisses them while confirming the Tribunal's order, which had gone against the assessee. Read with paragraph 2, which records that the assessee had appealed to the Tribunal and lost, the substance is that the assessee is the appellant before the High Court and the reference to the revenue in paragraph 1 is a slip. The outcome is unambiguous whichever way that is resolved: the question was answered in favour of the revenue and the appeals were dismissed. A numbering caution. The judgment reproduces paragraphs 5 to 8 of the Supreme Court's decision in CIT v. Gujarat Fluoro Chemicals (2013) 358 ITR 291 (SC). Those paragraph numbers belong to the Supreme Court's judgment and not to this one, which has six numbered paragraphs of its own. A citation to 'paragraph 7' of this judgment is a citation to nothing, and a proposition attributed to this Court from that block is in truth the Supreme Court's. The Supreme Court judgment itself has NOT been read for this entry; this library holds a separate entry for it, and that is where its reasoning should be taken from. Two things about the weight of this judgment. It is an oral judgment, and the Court said in terms that it saw no reason to give elaborate reasons of its own because the issue was no longer res integra. And the assessee's counsel conceded he was not in a position to dispute CIT v. Gujarat Fluoro Chemicals or to point to any contrary decision — which means the contrary line, and in particular the Karnataka High Court in CIT v. Syndicate Bank and the three-Judge Bench in CIT v. HEG Ltd., was never put to this Court. The judgment is therefore authority for the proposition it states, but it is not an answer to an argument it never heard, and that is the point the why-it-matters note develops. Two further limits on the entry. The years in issue are assessment years 1995-96 and 1996-97, and the refusal of the claim was made in an order under s.154 — a rectification — so the Court was dealing with a claim raised by rectification and not with an original computation. And the judgment says nothing about s.244A(1A), the additional three per cent where a refund arises out of an appellate order, which is a separate statutory entitlement and needs no argument about interest on interest. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The question was answered in favour of the Revenue and the tax appeals were dismissed, the Tribunal's order being confirmed. Because Parliament inserted s.244A to provide for interest on refunds in various contingencies, it is only that interest provided for under the statute which may be claimed by an assessee from the Revenue, and no other interest on such statutory interest (paras 5 and 6).
TaxSphere, “Gujarat State Fertilisers & Chemicals Ltd v Dy CIT”, https://taxnotice.vittsphere.com/caselaw/case/gujarat-state-fertilisers-244a-no-interest-on-delayed-interest/ (validity last checked 2026-09-08)
The judgment itself is a government work and may be quoted freely. The summary, the validity note and the reasoning on this page are this library's own writing: quote them with attribution, and please do not present either as the words of the court — this page keeps the two apart and so should a quotation of it.
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