The Kerala High Court has observed that there is no provision in the Income Tax Act to mandate Interest on Interest with respect to the refund.
The assessee-respondent in these cases is the State Bank of Travancore, which is now amalgamated with the State Bank of India. The question raised is as to whether the Tribunal was correct in having granted mandate interest on interest with respect to the refund for the various periods.
The assessments were completed and there were various proceedings, including rectification, appeals, revision and so on and so forth. When the statutory proceedings were completed, there was a refund due to the assessee in all these years. The refund was made with interest. The Assessee claimed interest on interest, which the Tribunal permitted as per the afore-cited decision.
While relying the decision on Commissioner of Income Tax v. Gujarat Fluoro Chemicals, the division bench comprising of Justice K. Vinod Chandran and Justice Ashok Menon said that, “the clarification has put it in the proper perspective and the facts in the present case do not commend such a drastic measure of interest on interest. We, hence, allow the appeals and set aside the order of the Tribunal on the sole issue of grant of interest on interest on the refunds and answer the question of law in favour of the Revenue and against the assessee, following the above said decision”.
