Electronic Cash Ledger deposits prevent compensatory interest accrual after the return due date despite delayed return filing.

Interest under Section 50 is described as compensatory and not chargeable on tax amounts credited to the Electronic Cash Ledger on or before the return due date, even where the return is filed later and the ledger is debited only upon filing. Such deposits remain available solely to discharge tax liability and are treated as advance tax. The proviso to Rule 88B is stated to accord with this position. The notes further state that rejecting a refund of excess interest without applying a binding ruling specifically placed before the authority was arbitrary and showed non-application of mind; refund of the excess interest, with statutory interest, was directed.

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Issues: Whether interest for delayed filing of returns can be levied on tax amounts credited to the Electronic Cash Ledger on or before the return due date, and whether refund of excess interest could be denied by treating the proviso to Rule 88B as prospective.

Analysis: Amounts deposited in the Electronic Cash Ledger remain available only for discharge of tax liability and are in the nature of advance tax. Interest under Section 50 is compensatory and cannot be charged for the period after tax has already been deposited in that ledger merely because the return was filed later and the ledger was debited on filing. The proviso to Rule 88B accords with this position. The refund claim was rejected without applying the binding ruling that governed the claim, despite that ruling having been specifically brought to the authority's notice. Such rejection was arbitrary and reflected non-application of mind.

Conclusion: Interest is not payable on tax amounts lying in the Electronic Cash Ledger from the return due date until debit upon delayed filing; denial of refund of the resulting excess interest was unsustainable and the refund was directed to be granted with statutory interest.

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