Update:
The Windows Phone store issues are not limited to in-app purchases, but random issues like not being able to access store, “No results” in various apps lists like “Top Free, Top Paid” etc are also being reported. Store on my Lumia 530 has shown me the “No results” error with Top Free list. Seems, something is going on in background.
It seems, there is a bug in Windows Phone store, which is causing issues with in-app purchases. Users continue to see ads even after in-app purchases. It seems that the in-app purchases fail to download as well. Rudy Huyn, the well-known Windows Phone developer has tweeted about this,
To all WP users: the store doesn’t download your in-app purchase for the moment, it’s a bug from the store, msft works on it to fix it
— Rudy Huyn (@RudyHuyn) September 21, 2014
Thanks Mohan for the tip. Cheers!!