Ganesan Nimalaruban a prison inmate in Vavuniya jail in northern Sri Lanka was injured late last month as were several other LTTE suspects when the prisoners took hostage three prison guards. He died later.
The case would now be heard on July 20, lawyers said.
Nimalaruban's parents had sought the overturning of a lower court order which said, funeral must be held in Colombo, outside his native Vavuniya town.
The state attorneys argued that holding the funeral in Vavuniya may endanger peace and could be used by some elements to create civil disturbance.
The Vavuniya jail was temporarily shut on June 29 after LTTE suspects had taken three prison guards hostage.
A joint military and police operation had ended the siege which came after prisoners rioted for several days.
The inmates were later transferred to the Ragama prison, north Colombo where the Tamil human rights campaigners claimed that Nimalaruban and other Tamil prisoners had come under attack.
However the prison authorities said he had died of a heart attack.