Court orders refund with interest on interest, directs calculation within three months.

The High Court allowed the writ petitions, quashed the Commissioner's order, and directed the respondents to calculate the interest payable from the date of deposit until the refund date, including interest on interest. The respondents were instructed to complete the calculations within three months from the receipt of the certified copy of the order.

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Issues Involved:
1. Entitlement to payment of interest on refund under sections 244(1A) and 214 of the Income-tax Act, 1961.
2. Calculation period for interest on refund.
3. Application of Supreme Court judgment in Sandvik Asia Ltd. v. CIT [2006] 280 ITR 643.
4. Entitlement to interest on interest.

Issue-wise Detailed Analysis:

1. Entitlement to Payment of Interest on Refund:
The assessee-petitioner challenged the common order dated April 30, 2007, passed by the Commissioner of Income-tax, Patiala, under section 264 of the Income-tax Act, 1961, concerning the assessment years 1978-79, 1979-80, and 1980-81. The petitioner sought interest on the refund amounts as per sections 244(1A) and 214 of the Act, citing the Supreme Court's interpretation in Sandvik Asia Ltd.'s case [2006] 280 ITR 643.

2. Calculation Period for Interest on Refund:
For the assessment year 1978-79, the assessee-petitioner paid advance tax on December 13, 1977, and filed a return declaring a loss. The assessment was completed on March 26, 1981, resulting in a refund. The petitioner demanded interest from the date of advance tax payment until the refund date (December 13, 1977, to January 28, 1984). The Assessing Officer allowed interest only up to the date of regular assessment (March 26, 1981).

Similarly, for the assessment year 1979-80, the petitioner paid advance tax in installments and filed a return declaring a loss. The assessment was completed on March 31, 1982. The petitioner claimed interest up to the refund date (August 22, 1985), while the Assessing Officer allowed interest only up to the regular assessment date (March 31, 1982).

For the assessment year 1980-81, the petitioner paid advance tax and filed a return declaring income. The assessment was completed on February 28, 2003, resulting in a refund. The petitioner demanded interest from the advance tax payment dates to the refund date (November 8, 1985). The Assessing Officer allowed interest only up to the regular assessment date (February 28, 1983).

3. Application of Supreme Court Judgment in Sandvik Asia Ltd. v. CIT:
The Commissioner of Income-tax rejected the petitioner's claims, stating that section 214(1A) as amended from April 1, 1985, was not applicable to the case and that interest under section 214(1) was payable only up to the date of regular assessment. The Commissioner also argued that the Supreme Court's judgment in Sandvik Asia Ltd.'s case did not establish a universal principle but was specific to that case.

4. Entitlement to Interest on Interest:
The petitioner did not initially demand interest on interest but claimed it based on the Supreme Court's interpretation in Sandvik Asia Ltd.'s case. The court held that the petitioner was entitled to interest on the refund amount from the date of deposit until the refund date, including interest on interest, as per the statutory rate of 12% per annum under section 244(1) of the Act.

Conclusion:
The High Court allowed the writ petitions, quashed the Commissioner's order, and directed the respondents to calculate the interest payable from the date of deposit until the refund date, including interest on interest. The respondents were instructed to complete the calculations within three months from the receipt of the certified copy of the order.

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