Refund interest under income-tax law runs from the original Tribunal order, with discretion limited to the rate, not the commencement date.

Under the proviso to section 66(7) of the Indian Income-tax Act, 1922, interest on a tax refund is governed by a special statutory scheme distinct from the general refund provisions. The Commissioner's discretion extends only to fixing the rate of interest, not the date from which it runs, and a wholly discretionary commencement date was rejected as arbitrary. Interest is therefore compensatory for amounts retained under the original Tribunal order later reversed on reference, and the consequential order under section 66(5) does not create a fresh refund right. Interest runs from the original Tribunal order, or from the date of payment if tax was paid after that order.

---

---

Issues: Whether, under the proviso to section 66(7) of the Indian Income-tax Act, 1922, interest on refunded tax was payable from the date of payment, from the date of the Tribunal's consequential order under section 66(5), or from the date of the original Tribunal order which was the subject of the reference.

Analysis: The refund mechanism under section 66(7) was treated as a special statutory scheme applicable where the assessee succeeds in reference, distinct from the general refund provisions in Chapter VII. The proviso authorises the Commissioner to allow interest, but the discretion was construed as relating only to the rate of interest, not to the date from which interest runs. A construction leaving the commencement date wholly to administrative choice was rejected as arbitrary. The Court held that the proviso is intended to compensate for amounts withheld under the erroneous original Tribunal order, and the consequential order under section 66(5) merely replaces that earlier order rather than creating a fresh right to refund.

Conclusion: Interest under section 66(7) was held payable from the date of the original Tribunal order, or from the date of tax payment if payment was made after that order, and not from the date of the consequential order. The petitioners were therefore entitled to interest at 3% from the original Tribunal order date.

Ratio Decidendi: Under the proviso to section 66(7) of the Indian Income-tax Act, 1922, the Commissioner's discretion extends only to the rate of interest, while the commencement date is fixed by law with reference to the original Tribunal order that was reversed on reference.

---