Interest on refunded security deposit governed by statutory retention rules under the U.P. Trade Tax Act

Interest was payable on a security amount deposited in penalty proceedings and later refunded, because the department retained the money during the intervening period. Section 29 of the U.P. Trade Tax Act governed both the entitlement to interest and the applicable rate, so the assessee was entitled to interest for the period of wrongful retention from 8 October 1976 to 16 May 1997 at the statutory rate.

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Issues: Entitlement of the assessee to interest on the security amount deposited in connection with the penalty proceedings and refunded later.

Analysis: The assessee had deposited the amount pursuant to penalty proceedings, and the principal amount was eventually refunded. The only surviving controversy was whether interest was payable on the amount retained by the department from the date of deposit until the date of refund. In view of Section 29 of the U.P. Trade Tax Act, the retained amount was held to carry interest for the relevant period, and the rate of interest was to be governed by that provision.

Conclusion: The assessee was held entitled to interest from 8 October 1976 until 16 May 1997, at the rate prescribed under Section 29 of the U.P. Trade Tax Act.

Ratio Decidendi: Where an amount deposited with the department is ultimately refundable, Section 29 of the U.P. Trade Tax Act governs the assessee's right to receive interest for the period of wrongful retention.

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