My refund was paid but the s.244A interest due on it was left out. Is the department liable to pay interest on that omitted interest, or is that the forbidden interest on interest?
The Karnataka High Court held the department is liable, and that this is not interest on interest. Following the three-Judge Bench in CIT v. HEG Ltd., it held that the interest component partakes of the character of the 'amount' that becomes due to the assessee under s.244A, so an order of refund must include the interest payable, and if it does not, the Revenue is liable to pay interest on the shortfall.
Decided by the High Court (Alok Aradhe J and H.T. Narendra Prasad J) on 2020-10-07, reported as I.T.A. No. 582 of 2013 (High Court of Karnataka at Bengaluru), arising out of ITA No. 367/Bang/2010. It bears on section 244A, section 244A(1), section 214, section 243, section 244, section 154, section 246A, section 260A of the Income Tax Act 1961, in Refunds, Interest & Condonation, How Tax Law Is Read and Demand, Recovery & Stay matters.
This is the framing that survives CIT v. Gujarat Fluoro Chemicals, and it is how a practitioner should plead a delayed-interest claim. The Court dealt with Gujarat Fluoro Chemicals head on: it held that HEG Ltd., being a three-Judge Bench on the meaning of 'refund of any amount becomes due', bound it, and that it was therefore unnecessary to go into Sandvik Asia, a two-Judge decision later clarified in Gujarat Fluoro Chemicals. The limits are equally important. The Court also held that where the interest falls to be computed after 1 April 1989 it must be computed in accordance with s.244A only, and the assessee is entitled to interest in terms of s.244A only — so the claim lives or dies inside the section, and pre-1989 years governed by ss.214, 243 and 244 are a different regime. The opposite result on a differently framed claim was reached by the Gujarat High Court in Gujarat State Fertilisers & Chemicals (21 June 2016); carry both.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The assessee, a nationalised commercial bank, filed returns for assessment years 1984-85 and 1987-88 declaring losses of Rs.2.29 crores and Rs.6.9 crores. Assessments completed on 21 March 1986 and 30 January 1989 determined income of Rs.30.68 crores and Rs.42.44 crores. On the assessee's appeals, effect was given to the appellate orders and interest was granted on the excess tax paid. The assessee then applied under s.154 on 24 October 2005 for further interest said to have become due on giving effect to the appellate orders. The Assessing Officer rejected the applications on 19 December 2005. The Commissioner (Appeals) dismissed the appeal on 26 March 2007 on the ground that no appeal lies under s.246A against non-payment of interest. The Tribunal on 27 June 2008, relying on Sandvik Asia Ltd. v. CIT, held the Commissioner had authority to consider the claim and remitted the matter; the Commissioner (Appeals) on 8 January 2010 directed the assessing authority to determine the amount refundable including interest. The Revenue's appeal against that direction was dismissed by the Tribunal on 12 July 2013, and the Revenue appealed under s.260A. The Revenue relied on Gujarat Fluoro Chemicals, on the Delhi High Court in CIT v. Indian Farmer Fertilizer Co-operative and the Kerala High Court in Joseph Korah, and on Union of India v. Orient Enterprises; the assessee relied on the three-Judge Benches in CIT v. Narendra Doshi and CIT v. HEG Ltd., on the Delhi High Court in India Trade Promotion Organisation, on Circular No. 549 dated 31 October 1989 and on Union of India v. Tata Chemicals Ltd.
The Revenue's appeal was dismissed. The interest component partakes of the character of the 'amount' due under s.244A; an order of refund should include the interest payable on the amount refunded, and if it does not, the Revenue is liable to pay interest on the shortfall, which does not amount to payment of interest on interest. Where the interest falls to be computed after 1 April 1989 it must be computed in accordance with s.244A only and the assessee is entitled to interest in terms of s.244A only (para 8).
The Court set out the legislative history — that interest was previously payable under ss.214, 243 and 244, that s.244A was inserted by the Direct Tax Laws (Amendment) Act 1987 with effect from 1 April 1989 for assessment year 1989-90 onwards, and that the Board explained the change in paragraph 11.2 of Circular No. 549 dated 31 October 1989 — and reproduced s.244A(1) (paras 6 and the text following it). It held the language of the section to be precise, clear and unambiguous: sub-section (1) speaks of interest on refund of the amounts due to an assessee, and the section fixes the dates from which interest is to be calculated (para 7). It then rested on the two three-Judge Bench decisions: Narendra Doshi, which upheld the Gujarat High Court decisions in D.J. Works and Chimanlal S. Patel holding the Revenue liable to pay interest on the amount of interest it had unjustifiably failed to pay; and HEG Ltd., which construed 'refund of any amount becomes due to the assessee' as making the interest component part of the amount due. Because a three-Judge Bench was binding on it, the Court held it unnecessary to deal with Sandvik Asia, a two-Judge decision subsequently clarified in Gujarat Fluoro Chemicals (para 8).
If the refund does not include interest due payable on the amount refunded, the revenue would be liable to pay interest on the short fall. This does not amount to payment of interest on interest.
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Handle my notice → Ask a CA on WhatsAppThe Karnataka High Court held the department is liable, and that this is not interest on interest. Following the three-Judge Bench in CIT v. HEG Ltd., it held that the interest component partakes of the character of the 'amount' that becomes due to the assessee under s.244A, so an order of refund must include the interest payable, and if it does not, the Revenue is liable to pay interest on the shortfall. This was decided by the High Court (Alok Aradhe J and H.T. Narendra Prasad J) and bears on section 244A, section 244A(1), section 214, section 243, section 244, section 154, section 246A, section 260A of the Income Tax Act 1961. It is reported as I.T.A. No. 582 of 2013 (High Court of Karnataka at Bengaluru), arising out of ITA No. 367/Bang/2010. This is the framing that survives CIT v. Gujarat Fluoro Chemicals, and it is how a practitioner should plead a delayed-interest claim. The Court dealt with Gujarat Fluoro Chemicals head on: it held that HEG Ltd., being a three-Judge Bench on the meaning of 'refund of any amount becomes due', bound it, and that it was therefore unnecessary to go into Sandvik Asia, a two-Judge decision later clarified in Gujarat Fluoro Chemicals. The limits are equally important. The Court also held that where the interest falls to be computed after 1 April 1989 it must be computed in accordance with s.244A only, and the assessee is entitled to interest in terms of s.244A only — so the claim lives or dies inside the section, and pre-1989 years governed by ss.214, 243 and 244 are a different regime. The opposite result on a differently framed claim was reached by the Gujarat High Court in Gujarat State Fertilisers & Chemicals (21 June 2016); carry both. If it applies to you, the first step is this: Compute the 'amount due' as tax plus s.244A interest to the date the refund was actually granted, and show arithmetically what the refund order omitted.
The assessee, a nationalised commercial bank, filed returns for assessment years 1984-85 and 1987-88 declaring losses of Rs.2.29 crores and Rs.6.9 crores. Assessments completed on 21 March 1986 and 30 January 1989 determined income of Rs.30.68 crores and Rs.42.44 crores. On the assessee's appeals, effect was given to the appellate orders and interest was granted on the excess tax paid. The assessee then applied under s.154 on 24 October 2005 for further interest said to have become due on giving effect to the appellate orders. The Assessing Officer rejected the applications on 19 December 2005. The Commissioner (Appeals) dismissed the appeal on 26 March 2007 on the ground that no appeal lies under s.246A against non-payment of interest. The Tribunal on 27 June 2008, relying on Sandvik Asia Ltd. v. CIT, held the Commissioner had authority to consider the claim and remitted the matter; the Commissioner (Appeals) on 8 January 2010 directed the assessing authority to determine the amount refundable including interest. The Revenue's appeal against that direction was dismissed by the Tribunal on 12 July 2013, and the Revenue appealed under s.260A. The Revenue relied on Gujarat Fluoro Chemicals, on the Delhi High Court in CIT v. Indian Farmer Fertilizer Co-operative and the Kerala High Court in Joseph Korah, and on Union of India v. Orient Enterprises; the assessee relied on the three-Judge Benches in CIT v. Narendra Doshi and CIT v. HEG Ltd., on the Delhi High Court in India Trade Promotion Organisation, on Circular No. 549 dated 31 October 1989 and on Union of India v. Tata Chemicals Ltd. The matter was decided on 2020-10-07 by the High Court (Alok Aradhe J and H.T. Narendra Prasad J). On those facts the High Court held as follows. The Revenue's appeal was dismissed. The interest component partakes of the character of the 'amount' due under s.244A; an order of refund should include the interest payable on the amount refunded, and if it does not, the Revenue is liable to pay interest on the shortfall, which does not amount to payment of interest on interest. Where the interest falls to be computed after 1 April 1989 it must be computed in accordance with s.244A only and the assessee is entitled to interest in terms of s.244A only (para 8).
The Court set out the legislative history — that interest was previously payable under ss.214, 243 and 244, that s.244A was inserted by the Direct Tax Laws (Amendment) Act 1987 with effect from 1 April 1989 for assessment year 1989-90 onwards, and that the Board explained the change in paragraph 11.2 of Circular No. 549 dated 31 October 1989 — and reproduced s.244A(1) (paras 6 and the text following it). It held the language of the section to be precise, clear and unambiguous: sub-section (1) speaks of interest on refund of the amounts due to an assessee, and the section fixes the dates from which interest is to be calculated (para 7). It then rested on the two three-Judge Bench decisions: Narendra Doshi, which upheld the Gujarat High Court decisions in D.J. Works and Chimanlal S. Patel holding the Revenue liable to pay interest on the amount of interest it had unjustifiably failed to pay; and HEG Ltd., which construed 'refund of any amount becomes due to the assessee' as making the interest component part of the amount due. Because a three-Judge Bench was binding on it, the Court held it unnecessary to deal with Sandvik Asia, a two-Judge decision subsequently clarified in Gujarat Fluoro Chemicals (para 8). In the words reproduced by the source cited on this page: "If the refund does not include interest due payable on the amount refunded, the revenue would be liable to pay interest on the short fall. This does not amount to payment of interest on interest." The decision followed or applied CIT v. HEG Ltd. (2010) 324 ITR 331 (SC) — followed; CIT v. Narendra Doshi 254 ITR 606 (SC) — followed; D.J. Works v. Dy. CIT (1992) 195 ITR 227 (Gujarat) — approved through Narendra Doshi; Chimanlal S. Patel v. CIT (1994) 210 ITR 419 (Gujarat) — approved through Narendra Doshi; Sandvik Asia Ltd. v. CIT (2006) 280 ITR 643 (SC) — not dealt with, being a two-Judge decision later clarified.
It was decided by the High Court on 2020-10-07 and is reported as I.T.A. No. 582 of 2013 (High Court of Karnataka at Bengaluru), arising out of ITA No. 367/Bang/2010. 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 244A(1), section 214, section 243, section 244, section 154, section 246A, section 260A, 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 taxpayer. The Revenue's appeal was dismissed. The interest component partakes of the character of the 'amount' due under s.244A; an order of refund should include the interest payable on the amount refunded, and if it does not, the Revenue is liable to pay interest on the shortfall, which does not amount to payment of interest on interest. Where the interest falls to be computed after 1 April 1989 it must be computed in accordance with s.244A only and the assessee is entitled to interest in terms of s.244A only (para 8). It arises in Refunds, Interest & Condonation, How Tax Law Is Read and Demand, Recovery & Stay matters, on section 244A, section 244A(1), section 214, section 243, section 244, section 154, section 246A, section 260A of the Income Tax Act 1961, and was decided by Alok Aradhe J and H.T. Narendra Prasad 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. Plead the claim as s.244A interest on the shortfall in the amount due, not as interest on interest, and say so expressly in the ground of appeal. Rely on CIT v. HEG Ltd. (2010) 324 ITR 331 (SC) for the proposition that the interest component partakes of the character of the amount due; a three-Judge Bench is the answer to the two-Judge Sandvik problem. Check the year: for interest falling to be computed after 1 April 1989 the claim must be worked entirely within s.244A; for earlier years the s.214/243/244 regime and its own case law apply. Where the refund follows an appellate order, take s.244A(1A) as well and check whether the additional interest has been allowed.
Still good law. The judgment has become part of the Karnataka High Court's own standard citation on section 244A. It was applied in Biesse India Pvt Ltd v DCIT (5 February 2024), and the same formula recurs in Himalaya Wellness Company v DCIT (30 August 2024), Kaypee Electronics and Associates v DCIT (24 April 2025), Blue Yonder India Pvt Ltd v DCIT (11 September 2025) and Honeywell Technology Solutions Lab v DCIT (7 November 2025), in each of which the writ petition was allowed and interest on the withheld interest was directed. Nothing overruling or doubting it was found; it stands with the Supreme Court in CIT v HEG Ltd and CIT v Narendra Doshi, which the Karnataka Court cites alongside it. The practical point is worth stating plainly: where the Department refunds the principal but withholds the section 244A interest, that withheld interest is itself 'any amount' due under section 244A(1) and carries further interest. Two qualifications. Every decision traced applying it is of the same High Court, so outside Karnataka the line is persuasive rather than settled, and the Revenue continues to resist it elsewhere. And the judgment leaves the pre-1989 position unresolved on its own facts, so a claim for a year before 1 April 1989 does not get the benefit of it without more. One further point on what has not been checked. The decisions traced are all of the writ side, in each of which the petition was allowed and a direction given; no decision has been examined in which the Department resisted successfully, and no Supreme Court treatment of this judgment has been looked for. The proposition is safe enough to plead, but it should be pleaded on the words of s.244A(1) with these decisions in support rather than on the citation alone. 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.
The appeal before the High Court is I.T.A. No. 582 of 2013 for assessment year 1987-88, but the facts and the computation run across assessment years 1984-85 and 1987-88, both of which precede the insertion of s.244A with effect from 1 April 1989 — a point the Revenue took in rejoinder (para 5) and which the Court did not separately resolve before concluding at para 8 that interest falling to be computed after 1 April 1989 must be computed under s.244A only. A reader relying on this judgment for a pre-1989 year should read paragraphs 5 and 8 together and treat the position as unsettled. The judgment sets out s.244A(1) at length between paragraphs 6 and 7; that reproduction is of the text as it stood in 2020 and should not be assumed to be current. The final disposal appears in an unnumbered paragraph after paragraph 8. CIT v. HEG Ltd. and CIT v. Narendra Doshi have not been read directly for this entry, and what they are said to hold is what this judgment records. Three things about the reach of the decision. The proposition is a construction of the words 'any amount' in s.244A(1): where the Department refunds the principal but withholds the interest already accrued, the withheld interest is itself an amount due and carries further interest. It is not a proposition that interest runs on interest generally, and it should not be put that way. The pre-1989 years matter for a second reason. Sections 214, 243 and 244, which governed interest before s.244A, work differently, and a claim for a year before 1 April 1989 has to be made under those provisions on their own terms; paragraph 8 addresses only interest falling to be computed after that date. And the route matters. Where the shortfall is arithmetic on the face of the order, the quicker course is rectification under s.154 rather than an appeal under s.246A, and a rectification refused is itself appealable. This case reached the High Court under s.260A, which means the findings of fact below were not reopened, so the value of the decision is in the construction and not in anything it decides about a particular computation. A practitioner should therefore put the figures beyond dispute at the rectification stage and keep the argument for the principle, because the principle is what this judgment supplies. 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 Revenue's appeal was dismissed. The interest component partakes of the character of the 'amount' due under s.244A; an order of refund should include the interest payable on the amount refunded, and if it does not, the Revenue is liable to pay interest on the shortfall, which does not amount to payment of interest on interest. Where the interest falls to be computed after 1 April 1989 it must be computed in accordance with s.244A only and the assessee is entitled to interest in terms of s.244A only (para 8).
TaxSphere, “CIT v M/s. Syndicate Bank”, https://taxnotice.vittsphere.com/caselaw/case/syndicate-bank-244a-interest-component-part-of-amount-due/ (validity last checked 2026-09-08)
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My client's old assessment was set aside, a fresh assessment produced a large refund, and no interest was paid. For a year before 1989-90, which section gives him interest?
Can I still rely on Sandvik Asia to claim interest on the interest due on my refund?
The department owes me s.244A interest and has sat on it. Can I claim interest on that interest?
The officer has passed a s.154 order shifting my TDS credit to the next year because the payer's accounting year is different from mine. Can he do that by rectification?
