Interest on refund of tax: Section 244: A. Ys. 1982-83 to 1990-91: Whether whole of interest taxable in the year of grant – No: Has to be spread over the respective AYs to which it relates:

For the A. Y. 1982-83 the Assessing Officer made additions and raised a demand which the assessee paid. The Tribunal deleted the additions. The Assessing Officer gave effect to the order of the Tribunal and refunded the tax paid by the assessee together with interest of Rs. 79,950/- for the period from 30- 10-1985 to 31-08-1989. The Assessing Officer brought to tax the whole of the interest amount in the A. Y. 1990-91 ignoring the claim of the assessee to spread over the said amount over the respective years. The CIT(A) allowed the assessee’s claim but the Tribunal upheld the decision of the Assessing Officer.

On appeal by the assessee, the Andhra Pradesh High Court reversed the decision of the Tribunal and held as under:

“i) The stand of the Department that interest u/s. 244(1A) accrues to the assessee only when it is granted to the assessee along with the order issued u/s. 240 is not correct. Interest accrues on a day to day basis on the excess amount paid by the assessee.

ii) The entitlement of interest is a right conferred by the statute and it does not depend on the order for the refund being made. An order for the refund is only consequential order which in law is required to be made more in the nature of complying with the procedural requirement, but the right to claim interest of the assessee is statutory right conferred by the Act. Accordingly, interest has to be spread over and taxed in the respective years.”