Statutory interest on restored gift-tax demand is payable where unpaid tax remains outstanding after appellate relief is reversed.

Interest under section 32(2) of the Gift-tax Act was payable on unpaid tax where an appellate reduction in assessment was later set aside and the original assessment was restored. The liability arose from failure to pay the demand within the prescribed time, and the restored assessment was treated as having operated during the relevant period, leaving the outstanding balance subject to statutory interest. The provision was applied on the same footing as the corresponding Income-tax Act mechanism. The interest demand was upheld and the challenge failed.

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Issues: Whether interest was leviable under section 32(2) of the Gift-tax Act, 1958 on the unpaid tax amount after the appellate reduction was set aside and the original assessment order was restored.

Analysis: The liability to pay interest under section 32(2) follows from non-payment of the amount specified in the notice of demand within the prescribed time. Where the appellate relief is later reversed and the original assessment is restored, the original demand is treated as having operated during the relevant period, and the unpaid balance remains liable to statutory interest. The section was treated as analogous to the corresponding provision under the Income-tax Act, and the earlier appellate reduction did not defeat the consequence of non-payment once the assessment stood restored.

Conclusion: The interest demand was valid and enforceable, and the challenge failed.

Final Conclusion: The petition was dismissed, and the demand for interest on the outstanding gift-tax liability was upheld.

Ratio Decidendi: When an assessment or demand is restored after appellate reversal, statutory interest becomes payable on the unpaid amount for the period of default as though the original demand had continued in force.

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