Pre-deposit refund interest arises only after delay beyond three months under the preserved pre-amendment regime.

For pre-deposits made before 06.08.2014, the proviso to substituted Section 35FF retains the earlier interest regime. Interest becomes payable only if the refundable pre-deposit is not returned within three months of communication of the appellate order. As the pre-deposit was refunded within that period, no statutory entitlement to interest arose. The note states that denial and recovery of interest already refunded were therefore legally sustainable.

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Issues: Whether interest was payable on refund of a pre-deposit made before 06.08.2014, and whether denial and recovery of the interest already refunded were legally sustainable.

Analysis: The proviso to the substituted Section 35FF preserves the pre-amendment regime for deposits made before 06.08.2014. Under that regime, interest becomes payable only where the refundable deposit is not returned within three months from communication of the appellate order. Since the deposit was made on 21.04.2014 and refunded within the stipulated three-month period after the appellate order, no statutory entitlement to interest arose.

Conclusion: Interest on the refunded pre-deposit was not payable; denial and recovery of the interest amount were valid, against the assessee.

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