Strict construction of tax refund interest provision upheld; benefit confined to High Court reference cases and article 14 challenge rejected.

Interest on refund under section 64(7) of the Estate Duty Act was confined to cases where assessment was reduced on a reference to the High Court, and the Court refused to extend the benefit to reductions obtained before the Tribunal or first appellate authority. That restricted scope was upheld as a valid classification in taxation law and was not found arbitrary or discriminatory under article 14. The Interest Act, 1839 was also held inapplicable to estate duty refunds, as it governed civil courts and not tax authorities acting under the Estate Duty Act. The challenge to denial of interest therefore failed.

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Issues: (i) whether interest on refund under section 64(7) of the Estate Duty Act, 1953 was admissible when the assessee succeeded before the Tribunal and not only on a reference to the High Court; (ii) whether the restricted operation of section 64(7) violated article 14 of the Constitution of India; and (iii) whether interest could be claimed under the Interest Act, 1839.

Issue (i): Whether interest on refund under section 64(7) of the Estate Duty Act, 1953 was admissible when the assessee succeeded before the Tribunal and not only on a reference to the High Court.

Analysis: The language of section 64(7) was held to be plain and unambiguous. It grants interest only where the amount of assessment is reduced as a result of a reference to the High Court. The Court declined to extend the provision by interpretation to cases where the reduction occurred by orders of the Tribunal or the first appellate authority, holding that such enlargement would amount to legislation by the Court.

Conclusion: The assessee was not entitled to interest under section 64(7) on the basis of success before the Tribunal.

Issue (ii): Whether the restricted operation of section 64(7) violated article 14 of the Constitution of India.

Analysis: The Court held that persons whose cases are reduced on a reference to the High Court form a separate class for purposes of the provision. In taxation matters, the Legislature has wide latitude in classification, and the distinction drawn by section 64(7) was found to be neither arbitrary nor discriminatory. The attempt to read down the provision to sustain a broader entitlement was rejected.

Conclusion: Section 64(7) was held not to be violative of article 14.

Issue (iii): Whether interest could be claimed under the Interest Act, 1839.

Analysis: The Court held that the Interest Act empowered civil courts to award interest on debts or sums certain in the circumstances stated in that Act, and not tax authorities acting under the Estate Duty Act. Refunds arising under the estate duty law were not governed by the Interest Act, and the authorities under that Act had no power to grant interest on that basis.

Conclusion: No interest was payable under the Interest Act, 1839.

Final Conclusion: The challenge to the refusal of interest failed on all grounds, and the writ petition could not succeed.

Ratio Decidendi: A statutory provision granting interest on tax refunds must be construed strictly according to its express terms, and where the legislature confines the benefit to a specified class, courts cannot enlarge it by interpretation or constitutional reading down unless the classification is shown to be arbitrary.

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