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Mr. Mohan Parasaran submitted that in the present case, the Assessing Officer did not grant interest to the assessee as per his claim and the Assessing Officer's stand was upheld by the C.I.T. Pune vide his order dated 28.02.1990 under Section 264 and it can be seen that the order under Section 264 passed by the CIT is as per the position of law as it then was and before the decision of this Court and that the decision of Modi Industries Ltd. Case (supra) had been given in 1995 and this Court has only clarified the position regarding payment of interest under Sections 214 and 244(1A). This Court's decision was received on 29.09.1997. Under such circumstances, it cannot be said that the Department had wrongfully withheld the assesse's money without any authority of law and naturally such a conclusion cannot be drawn. The C.I.T. Pune had considered and judiciously interpreted the provisions of Sections 214 and 244 (1A) as per the established position of law as on that date i.e. 28.02.1990 and on the assessee's reference this Court had issued directions after seven years i.e. on 29.09.1997 which should have been expeditiously complied with as the monies were refunded to the assessee after the direction of this Court, the question of granting interest for the period the matter was sub judice, does not really arise. Mr. Mohan Parasaran has not cited or relied on any other judgment except Modi Industries Ltd. Case (supra). It was further submitted that interest payable on the refund amount under Section 244(1) is a simple interest at the rate specified therein and neither compound interest nor interest on interest is payable and that under Section 244(1A) no further interest will be payable under Section 244(1) for the same period and on the same amount and that there is no provision in the Act for payment of interest on interest.

9) Commissioner of Income-Tax vs. Needle Industries Pvt. Ltd., 233 ITR 370 Mr. Parasaran argued that the High Court was right in law in rejecting the appellant's claim on the sole ground that as the amount due to the appellant was on interest, no compensation could be paid to it even when gross delay in payment was admittedly made by the Department contrary to law. The Division Bench of the Madras High Court in Commissioner of Income-Tax vs. Needle Industries Pvt. Ltd., 233 ITR 370 succinctly interpreted the expression "amount" in Section 244(1A). In that case, the original assessment for the assessment year 1974-75 was completed on August 29, 1977 and the order of assessment was the subject-matter of appeal before the appellate authority and the Tribunal. The Tribunal ordered refund. The ITO allowed interest under section 244 (1A) the assessee filed an appeal against the order passed by the ITO refusing to grant interest on interest. The Tribunal, on an appeal by the Revenue upheld the due to the CIT (Appeals) and held that the assessee was entitled to interest under Section 244(1A) in respect of interest calculated under section 139(8) and 215 and refunded under the provisions of the Act. The Tribunal at the instance of the Revenue referred certain questions of law for consideration by the High Court. The High Court, while construing the expression "amount" in earlier part of Section 244(1A) held that it would refer to not only the tax but also the interest on the expression "amount" is a neutral expression and it cannot be limited to the tax paid in pursuance of the order of assessment. The High Court held as follows:

"Further, the expression, "amount" in the earlier part of the section 244(1A) would refer to not only the tax but also the interest and the expression "amount" is a neutral expression and it cannot be limited to the tax paid in pursuance of the order of assessment. We are of the opinion that the expression "tax or penalty" found in the later part of the section 244(1A) would not qualify or restrict the scope of the expression "amount" found in the earlier part to mean only "tax or penalty". As already seen, the function of the later part of section 244(1A) of the Act is to find out the excess of the amount which the assessee paid by way of tax or penalty and that is the reason the expression "tax or penalty" has been employed. However, to determine the amount on which the Revenue is liable to pay interest, section 244(1A) gives emphasis on the amount paid by the assessee in pursuance of the order of assessment and the amount, in our opinion, cannot be limited to the amount of tax or penalty, but would encompass the amount of interest paid by the assess. The clear intention of Parliament is that the right to interest will compensate the assessee for the excess payment during the intervening period when the assessee did not have the benefit of use of such money paid in whatsoever character. In addition, if a literal meaning is given to the expression, "tax"

found in the later part of section 244(1A) of the Act, it will create an anomalous situation resulting in exclusion of the concept of the interest. In our opinion, the word "tax" in the later part of section 244(1A) has to be construed in the light of the expression "amount" found in the earlier part of section 244(1A) of the Act to include the amount of interest paid by the assessee. Therefore, in the context of section 244(1A) of the Act, the expression "tax", in our opinion, would include interest also and the definition of tax in section 2(43) meaning "income-tax" cannot be applied in the context of section 244(1A) of the Act. Consequently, the interest paid in pursuance of the order of assessment has to be regarded as forming part of income-tax or an adjunct to income-tax. The result would be that the assessee is entitled to interest on the interest refunded also. As a matter of fact, in the subsequent order of rectification, the Income-tax Officer has granted interest on the refunded interest which clearly shows the right thinking of the Department in accepting the position that the assessee would be entitled to interest on the interest refunded. The view of the Appellate Tribunal that the assessee would be entitled to interest on the refunded amount of interest levied under sections 139(8) and 215 of the Act is legally sustainable in law."