Interest on refunded purchase price allowed after compulsory purchase set aside, but the rate was reduced for the relevant period.

Interest was payable on the refunded purchase price after the compulsory purchase order under Chapter XX-C was set aside, because the respondents had retained and enjoyed the money while the appellant was deprived of the property's benefit. The earlier appellate court had removed the interest component without reasons, and the Court held that the circumstances justified compensation by way of interest. However, the technical position on possession warranted moderation of the rate, so the interest fixed by the single judge was reduced from 15% to 7.5% for the relevant period.

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Issues: Whether the appellant was entitled to interest on the purchase price refunded by the respondents on the setting aside of the compulsory purchase order under Chapter XX-C of the Income-tax Act, 1961, and, if so, at what rate.

Analysis: The respondents had retained and enjoyed the purchase price for the relevant period, while the appellant had been deprived of the benefit of the property. The earlier appellate court had set aside the interest component without recording reasons. The Court held that interest was warranted in the circumstances, but took note of the technical position regarding possession and therefore found that the rate fixed by the single judge required moderation.

Conclusion: Interest on the refunded purchase price was payable, but the rate was reduced from 15% to 7.5% for the relevant period.

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