Operative appellate order and refund interest: adjusted tax demand must be refunded when the underlying demand has been deleted.

An operative appellate order deleting the underlying tax demand meant the revenue could not refuse refund of the amount adjusted against that demand while the order remained unstayed and un-set aside. The Court treated the earlier legal position as continuing for later assessment years unless the provision was amended or substituted, and directed the tax authorities to reconsider the refund applications. If the demand had in fact been deleted, the adjusted amount had to be refunded with statutory interest.

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Issues: Whether the petitioner-bank was entitled to refund of the amount adjusted against tax demand in view of the earlier appellate order, and whether refund could be denied while that order remained unstayed and un-set aside.

Analysis: The earlier appellate decision had held that the provision invoked against the bank was not applicable on the relevant deposit, and the Court treated that legal position as continuing for subsequent assessment years unless the provision was amended or substituted. In view of the submission that the demand had already been deleted in appeal, the Court held that the refund claim required reconsideration by the income-tax authorities. It further directed that if the demand had in fact been deleted, the amount adjusted by the department had to be refunded with statutory interest. The Court also clarified that refund could not be denied so long as the appellate order continued to operate and had neither been stayed nor set aside by a higher forum.

Conclusion: The refund issue was answered in favour of the petitioner-bank, with a direction for a decision on the refund applications and refund with interest if the demand had been deleted.

Final Conclusion: The proceeding was disposed of by directing reconsideration of the refund claim and by recognising the bank's entitlement to refund with interest if the underlying demand no longer survived.

Ratio Decidendi: Where an appellate order deleting the demand remains operative and has not been stayed or set aside, the revenue cannot refuse refund, and statutory refund interest follows where the tax demand has been deleted.

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