Refund interest on excess tax follows the governing statute in force, with section 297(2)(i) directing application of the 1961 Act.

Interest on excess tax refund under section 66(7) of the Indian Income-tax Act, 1922 was treated as a special statutory entitlement arising only where tax became refundable on a High Court reference, not as a general right from the date of collection. The provision fixed the period for interest, while the Commissioner retained discretion only on the rate, which depends on the circumstances. Where the assessment was completed before the Income-tax Act, 1961 came into force and the refund arose afterwards, section 297(2)(i) applied the refund-interest provisions of the 1961 Act, namely sections 243 and 244. On that basis, no additional interest was payable because the refund was made within the prescribed period.

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Issues: (i) Whether interest on the excess tax refunded was payable under section 66(7) of the Indian Income-tax Act, 1922 from the date of collection till the date of refund and at what rate; (ii) whether, in view of section 297(2)(i) of the Income-tax Act, 1961, the claim for interest had to be governed by the refund provisions of the new Act.

Issue (i): Whether interest on the excess tax refunded was payable under section 66(7) of the Indian Income-tax Act, 1922 from the date of collection till the date of refund and at what rate.

Analysis: Section 66(7) was treated as conferring a special statutory right to interest only in cases where tax became refundable on a reference to the High Court. The provision did not create a general right to interest on excess collection from the date of payment. The Commissioner had no discretion as to the period for which interest ran, but had discretion as to the rate, which depended on the circumstances of each case.

Conclusion: The assessee was not entitled to claim interest as a general matter from the date of collection, and the rate fixed at 4% was not shown to be improper.

Issue (ii): Whether, in view of section 297(2)(i) of the Income-tax Act, 1961, the claim for interest had to be governed by the refund provisions of the new Act.

Analysis: The assessment had been completed before the commencement of the new Act and the refund fell due after such commencement. The transitory provision in section 297(2)(i) therefore attracted the refund interest provisions of the 1961 Act, namely sections 243 and 244, and not section 66(7) of the old Act. On that footing, no interest was payable because the refund was made within the period prescribed by the new Act.

Conclusion: The claim for interest was governed by the Income-tax Act, 1961 and failed under sections 243 and 244.

Final Conclusion: The writ petition failed because the refund interest claim had to be decided under the new Act, and the petitioner was not entitled to the additional interest sought.

Ratio Decidendi: Where an assessment completed before the commencement of the Income-tax Act, 1961 gives rise to a refund after such commencement, section 297(2)(i) applies and the refund-interest provisions of the 1961 Act govern the claim; section 66(7) of the Indian Income-tax Act, 1922 cannot be invoked, and the statutory authority has discretion only in matters left to it by the governing provision.

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