Refund interest under income tax law starts from actual payment date, not from later appellate or court order dates.

Interest on a refund arising from reduction of assessment under the proviso to section 66(7) of the Indian Income-tax Act, 1922 runs from the date the tax was actually paid, because the later reduction merely reveals that the earlier payment was overpaid. The Commissioner may regulate the rate of interest on the refund, but cannot lawfully postpone the commencement date to a later point such as the date of the High Court's order or the appellate order giving effect to it. Where the refunded amount is adjusted against subsequent tax arrears, interest continues only until the date of such adjustment.

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Issues: Whether interest payable on refund under the proviso to section 66(7) of the Indian Income-tax Act, 1922 could be restricted to commence only from the date of the High Court's order or the appellate order giving effect to it, instead of from the date when the tax was actually paid.

Analysis: The provision contemplates refund of the amount overpaid when an assessment is reduced as a result of a reference. The overpayment arises from the date on which the assessed tax was paid, because the later reduction of assessment merely declares that the earlier payment had become an overpayment. The Commissioner's discretion under the proviso extends to allowing interest and fixing its rate, but it does not include power to curtail the period for which interest is payable by postponing its commencement to a later date unrelated to the actual payment. The amount, once adjusted against subsequent tax arrears, would carry interest only up to the date of such adjustment.

Conclusion: Interest on the refunded amount was payable from the dates of actual payment of the assessed tax until the dates of adjustment, and the Commissioner could not lawfully restrict the commencement of interest to July 30, 1970 or September 3, 1971.

Ratio Decidendi: Under the proviso to section 66(7) of the Indian Income-tax Act, 1922, the Commissioner may regulate the rate of interest on an overpaid refund but cannot postpone the commencement of interest beyond the date on which the tax was actually paid and thereby became overpaid upon reduction of assessment.

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