INCOME TAX OFFICER 'A' WARD, INDORE vs GWALlOR RAYON SILK MANUFACTURING (WEAVING) co.LTD., BIRLAGR

The Supreme Court held that under Section 220(2) of the Income-tax Act, 1961, the rate of interest on tax arrears is fixed by the Finance Act and cannot be varied by the Income-tax officer. The Court clarified that while sub-sections (2) and (3) of Section 220 deal with different aspects, they are interrelated, and any order under sub-section (3) must adhere to the rate specified in sub-section (2). The appeal was allowed, affirming that the Income-tax officer lacks the authority to accept a higher interest rate than that prescribed by the Finance Act.