Section 220(2) interest runs from the original demand notice despite stay, if the demand is later restored in appeal.

Interest under section 220(2) becomes payable when the amount in a notice of demand is not paid within the statutory period. An interim stay on recovery does not erase the original default for interest purposes, and a later deletion of the demand in first appeal does not prevent revival of the original notice if the demand is restored in further appeal. The statutory scheme under section 220 and the Validation Act was applied to hold that interest runs with reference to the original demand notice until actual payment. Cases where the demand had already been satisfied were distinguished on that basis.

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Issues: Whether interest under section 220(2) of the Income-tax Act, 1961 was leviable from the due date in the original demand notice notwithstanding interim stay and subsequent deletion of the demand in first appeal, when the demand was later restored in further appeal.

Analysis: The liability to interest under section 220(2) arises on failure to pay the amount specified in a notice of demand within the statutory period. The grant of stay on the demand did not efface the original default for the purpose of interest. The Tribunal treated the Board circular as non-binding for construing the statute and applied the statutory scheme of section 220 along with the Validation Act, holding that where an original demand notice is not satisfied and the assessment is later restored in appeal, the original notice revives and interest is computed with reference to that notice until actual payment. The decision distinguished cases where the assessee had already satisfied the demand notice.

Conclusion: Interest under section 220(2) was correctly levied from the due date mentioned in the original demand notice until actual payment, and the assessee's challenge failed.

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