Interest on refunded tax amount held payable where the department returned only the principal and withheld the interest component.

Interest was held payable on the tax amount refunded by the department because the exemption already granted to the petitioner was valid and the tax deposited under the earlier direction was refundable. The Court noted that the department had returned only the principal and withheld the interest component, and reaffirmed that interest is the normal accretion on capital. Relying on its earlier decision, the Court directed payment of interest on the refunded amount from the date of deposit until refund.

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Issues: Whether the petitioner was entitled to interest on the tax amount refunded by the department.

Analysis: The exemption already granted to the petitioner was held to be valid, and the tax amount deposited pursuant to the earlier direction was refundable. Since the department returned only the principal amount and withheld the interest component, the Court held that interest is the normal accretion on capital and that the refund had to carry interest. The Court followed its earlier decision holding that interest is payable on such refunded amounts.

Conclusion: The petitioner was entitled to interest on the refunded tax amount, and the department was directed to pay interest at 15% per annum from the date of deposit until refund.

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