The department owes me s.244A interest and has sat on it. Can I claim interest on that interest?
No. Only the interest the statute itself provides may be claimed from the Revenue, and no other interest on that statutory interest. This is the Full Bench decision that overruled Sandvik Asia on the point.
Decided by the Supreme Court (H.L. Dattu, Sudhansu Jyoti Mukhopadhaya and M.Y. Eqbal, JJ. (three-Judge Bench, on a reference from a two-Judge Bench)) on 2013-09-18, reported as [2013] 358 ITR 291 (SC); [2013] 262 CTR 269 (SC); [2014] 222 Taxman 349 (SC); [2014] 42 taxmann.com 1 (SC). It bears on section 214, section 244A of the Income Tax Act 1961, in Refunds, Interest & Condonation matters.
This is what the department will cite against any interest-on-interest claim, and on that point it is right — the case favours the revenue and is in the library so you know what you are up against. Its main practical use is negative: it kills the Sandvik Asia argument that is still made every week in refund petitions (see the Sandvik Asia entry, which this decision overruled). It does not say that a refund paid short of the full refundable sum carries no interest — that is a different argument, and in Tata Communications Ltd v Dy CIT (2024) 462 ITR 86 (Bom) interest on the unpaid amount was held to arise because of non-payment of the total amount refundable, with the Revenue's SLP dismissed.
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There were no facts to decide. A two-Judge Bench, doubting the correctness of Sandvik Asia Ltd. v. CIT [2006] 280 ITR 643 (SC), referred a question of law by order dated 28 August 2012 for authoritative pronouncement: whether interest is payable by the Revenue to the assessee if the aggregate of instalments of advance tax or TDS paid exceeds the assessed tax. The three-Judge Bench heard the reference on that question alone and did not decide any assessee's case on its facts.
The Court did not overrule Sandvik Asia. It held that Sandvik Asia had been misquoted and misinterpreted by assessees and by the Revenue alike, both reading it as a direction to pay interest on statutory interest (para 6). What Sandvik Asia decided, on delays of twelve to seventeen years, was that the assessee should be compensated for the inordinate delay in refunding an amount which included statutory interest, and the Court there directed compensation 'not an interest on interest' (para 7). On the statute as it now stands, the Court clarified that since s.244A was inserted with effect from 1 April 1989 to provide for interest on refunds, only the interest provided for under the statute may be claimed by an assessee and no other interest on that statutory interest (para 8). The Court decided nothing else: it referred all the matters back to a two-Judge Bench to consider each case independently and take an appropriate decision one way or the other (para 9).
The Court went back to what Sandvik Asia had actually formulated for itself: the single issue there was whether an assessee is entitled to be compensated by the Department for delay in paying interest on the refunded amount admittedly due (para 4). On the facts of that case the delay ran from twelve to seventeen years, and it was because of that inordinate delay that the Court had directed payment of a stated sum with interest at 9 per cent, and penal interest at 15 per cent in default (para 5). Read that way, the award was compensation for delay, not a compounding of statutory interest (paras 6 and 7). Separately, Parliament had by Act No. 4 of 1988, with effect from 1 April 1989, inserted s.244A, which itself provides for interest on refunds in the various contingencies it covers. That statutory provision marks the limit of what may be claimed: interest under the statute, and no interest upon that interest (para 8).
We clarify 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 WhatsAppNo. Only the interest the statute itself provides may be claimed from the Revenue, and no other interest on that statutory interest. This is the Full Bench decision that overruled Sandvik Asia on the point. This was decided by the Supreme Court (H.L. Dattu, Sudhansu Jyoti Mukhopadhaya and M.Y. Eqbal, JJ. (three-Judge Bench, on a reference from a two-Judge Bench)) and bears on section 214, section 244A of the Income Tax Act 1961. It is reported as [2013] 358 ITR 291 (SC); [2013] 262 CTR 269 (SC); [2014] 222 Taxman 349 (SC); [2014] 42 taxmann.com 1 (SC). This is what the department will cite against any interest-on-interest claim, and on that point it is right — the case favours the revenue and is in the library so you know what you are up against. Its main practical use is negative: it kills the Sandvik Asia argument that is still made every week in refund petitions (see the Sandvik Asia entry, which this decision overruled). It does not say that a refund paid short of the full refundable sum carries no interest — that is a different argument, and in Tata Communications Ltd v Dy CIT (2024) 462 ITR 86 (Bom) interest on the unpaid amount was held to arise because of non-payment of the total amount refundable, with the Revenue's SLP dismissed. If it applies to you, the first step is this: Drop any prayer for interest computed on accrued s.244A interest; it will not survive this decision.
There were no facts to decide. A two-Judge Bench, doubting the correctness of Sandvik Asia Ltd. v. CIT [2006] 280 ITR 643 (SC), referred a question of law by order dated 28 August 2012 for authoritative pronouncement: whether interest is payable by the Revenue to the assessee if the aggregate of instalments of advance tax or TDS paid exceeds the assessed tax. The three-Judge Bench heard the reference on that question alone and did not decide any assessee's case on its facts. The matter was decided on 2013-09-18 by the Supreme Court (H.L. Dattu, Sudhansu Jyoti Mukhopadhaya and M.Y. Eqbal, JJ. (three-Judge Bench, on a reference from a two-Judge Bench)). On those facts the Supreme Court held as follows. The Court did not overrule Sandvik Asia. It held that Sandvik Asia had been misquoted and misinterpreted by assessees and by the Revenue alike, both reading it as a direction to pay interest on statutory interest (para 6). What Sandvik Asia decided, on delays of twelve to seventeen years, was that the assessee should be compensated for the inordinate delay in refunding an amount which included statutory interest, and the Court there directed compensation 'not an interest on interest' (para 7). On the statute as it now stands, the Court clarified that since s.244A was inserted with effect from 1 April 1989 to provide for interest on refunds, only the interest provided for under the statute may be claimed by an assessee and no other interest on that statutory interest (para 8). The Court decided nothing else: it referred all the matters back to a two-Judge Bench to consider each case independently and take an appropriate decision one way or the other (para 9).
The Court went back to what Sandvik Asia had actually formulated for itself: the single issue there was whether an assessee is entitled to be compensated by the Department for delay in paying interest on the refunded amount admittedly due (para 4). On the facts of that case the delay ran from twelve to seventeen years, and it was because of that inordinate delay that the Court had directed payment of a stated sum with interest at 9 per cent, and penal interest at 15 per cent in default (para 5). Read that way, the award was compensation for delay, not a compounding of statutory interest (paras 6 and 7). Separately, Parliament had by Act No. 4 of 1988, with effect from 1 April 1989, inserted s.244A, which itself provides for interest on refunds in the various contingencies it covers. That statutory provision marks the limit of what may be claimed: interest under the statute, and no interest upon that interest (para 8). In the words reproduced by the source cited on this page: "We clarify 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 Sandvik Asia Ltd. v. CIT [2006] 280 ITR 643 / 150 Taxman 591 (SC) (followed and relied upon, and explained).
It was decided by the Supreme Court on 2013-09-18 and is reported as [2013] 358 ITR 291 (SC); [2013] 262 CTR 269 (SC); [2014] 222 Taxman 349 (SC); [2014] 42 taxmann.com 1 (SC). Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section 214, section 244A, 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 cuts both ways and is cited by both sides. The Court did not overrule Sandvik Asia. It held that Sandvik Asia had been misquoted and misinterpreted by assessees and by the Revenue alike, both reading it as a direction to pay interest on statutory interest (para 6). What Sandvik Asia decided, on delays of twelve to seventeen years, was that the assessee should be compensated for the inordinate delay in refunding an amount which included statutory interest, and the Court there directed compensation 'not an interest on interest' (para 7). On the statute as it now stands, the Court clarified that since s.244A was inserted with effect from 1 April 1989 to provide for interest on refunds, only the interest provided for under the statute may be claimed by an assessee and no other interest on that statutory interest (para 8). The Court decided nothing else: it referred all the matters back to a two-Judge Bench to consider each case independently and take an appropriate decision one way or the other (para 9). It arises in Refunds, Interest & Condonation matters, on section 214, section 244A of the Income Tax Act 1961, and was decided by H.L. Dattu, Sudhansu Jyoti Mukhopadhaya and M.Y. Eqbal, JJ. (three-Judge Bench, on a reference from a two-Judge Bench). 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. Where interest is genuinely due and unpaid, plead it as non-payment of the total amount refundable rather than as compounding — that distinction is what the Tata Communications line turns on. Check that the period in dispute actually falls under s.244A, since the ruling is expressed as being about interest under the newly inserted s.244A rather than the earlier s.244(1A) scheme.
Still good law. Applied by the Supreme Court in Commissioner of Income-tax, Gujarat v. Gujarat Fluoro Chemicals [2014] 43 taxmann.com 350 / [2014] 222 Taxman 233 (SC) (Mag), Civil Appeal No. 3507 of 2014, decided 26 February 2014, which set aside a High Court order that had awarded running interest on accrued interest in reliance on Sandvik Asia, and remanded the writ petition for fresh consideration in the light of this clarification (paras 13 to 15). That Bench, H.L. Dattu and S.A. Bobde JJ., shared a member with the three-Judge Bench that gave the clarification. Note that the clarification is about compounding, not about interest on a sum still unpaid: a refund paid short of the full refundable amount is a different question. 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.
Two things commonly said about this decision are wrong and the judgment says so on its face. It did not overrule Sandvik Asia: it followed and relied upon that decision and explained it, holding that both sides had misread it (paras 6 and 7). And it decided nothing on any assessee's facts: having given the clarification it sent every matter back to a two-Judge Bench to be decided independently (para 9). What it settles is narrow but firm - under s.244A only the interest the statute provides may be claimed, and no interest upon that interest. Sandvik Asia remains available for its own point, that an assessee kept waiting for decades may be compensated for the delay. The display title on this page previously read 'Gujrat Fluro', which misspelled the respondent and named no parties. Corrected against the full cause title. The page address still carries the old spelling; it is left unchanged so that the URL, which is indexed, does not move. The order records the reference as made by order dated 28 August 2012; the later order in the same matter gives that date as 23 August 2012. Nothing turns on it. 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 Court did not overrule Sandvik Asia. It held that Sandvik Asia had been misquoted and misinterpreted by assessees and by the Revenue alike, both reading it as a direction to pay interest on statutory interest (para 6). What Sandvik Asia decided, on delays of twelve to seventeen years, was that the assessee should be compensated for the inordinate delay in refunding an amount which included statutory interest, and the Court there directed compensation 'not an interest on interest' (para 7). On the statute as it now stands, the Court clarified that since s.244A was inserted with effect from 1 April 1989 to provide for interest on refunds, only the interest provided for under the statute may be claimed by an assessee and no other interest on that statutory interest (para 8). The Court decided nothing else: it referred all the matters back to a two-Judge Bench to consider each case independently and take an appropriate decision one way or the other (para 9).
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