Interest on tax refund depends on the assessment year being part of the reference and the refund arising from that reference.

Interest on refund under the proviso to Section 66(7) of the Indian Income-tax Act, 1922 was confined to the assessment year that was actually the subject of the High Court reference, and the refund had to arise as a result of that reference. The right to interest could not be extended to another assessment year merely because the same legal principle was later applied there. As no reference had been made for assessment year 1943-44, the statutory condition for interest was absent, and interest was not payable for that year.

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Issues: Whether interest was payable on the refund of excess tax for assessment year 1943-44 under the proviso to Section 66(7) of the Indian Income-tax Act, 1922, when no reference had been made to the High Court for that assessment year.

Analysis: The proviso to Section 66(7) applies only where the assessment in question is the subject-matter of the reference and the amount overpaid is refunded as a result of that reference. The right to interest is thus linked to the particular assessment year referred and cannot be extended to a different year merely because a legal principle decided in an earlier reference was applied later. Since no reference had been made for assessment year 1943-44, the statutory condition for interest was absent.

Conclusion: Interest was not payable to the petitioner for assessment year 1943-44 and the refusal to grant interest was upheld.

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