Transitional refund interest under the Income-tax Act is payable when an old-assessment refund falls within the new regime.

Interest on delayed refund was held payable where assessments made under the 1922 Act later resulted in a refund under the transitional scheme of section 297(2)(i) of the 1961 Act. The Court read section 244 together with section 240 and section 297(2)(i), holding that the refund-interest provisions could not be applied in isolation and must be construed harmoniously to preserve the transition scheme. On that construction, once the refund became due under the new Act through appellate and reference proceedings, statutory interest attached to the delayed payment in favour of the assessee.

---

---

Issues: Whether interest on delayed refund was payable under section 244(1) of the Income-tax Act, 1961, where the assessments had originally been completed under section 23(3) of the Indian Income-tax Act, 1922, but the refund became due after the coming into force of the 1961 Act by reason of the appellate and reference proceedings.

Analysis: The relevant transitional provision was section 297(2)(i) of the Income-tax Act, 1961, which brought such cases within the new Act. The Court held that section 244 could not be read in isolation and had to be construed together with section 240 and section 297(2)(i). A harmonious reading preserved the scheme of the new Act and avoided making section 297(2)(i) redundant. On that construction, once the refund became due under the transitional regime, the assessee was entitled to statutory interest on the delayed payment.

Conclusion: The question was answered in the affirmative and in favour of the assessee; interest under section 244(1) was payable.

Ratio Decidendi: Transitional provisions bringing an old-assessment refund within the new Act must be read harmoniously with the refund-interest provisions of the new Act, and statutory interest is payable where the refund is ultimately governed by that transitional framework.

---