a) The income-tax dept. refunded part amount of tax to the assessee in the first phase and refunded remaining tax amount in the second phase.
b) The assessee arguedthat it was entitled to interest on balance amount of tax refund paid in the second phase but the AO had not granted the same.
c) Thus, the issue before the ITAT was:
Whether the amount of refund paid in the second phase should be adjusted first against the interest component and thereafter the balance amount should be adjusted against the principal component?
The ITAT held as under:
1) It was not a case of payment of interest on interest. Thus, the CIT (A) had wrongly applied the judgment of Hon'ble Supreme Court in the case of Gujarat Fluoro Chemicals 42 taxmann.com 1 (SC).
2) It is clear that where the amount of tax demanded is paid to the assessee then it shall first be adjusted towards interest payable and balance, if any, adjusted towards whatever tax payable.