Law:

Section:

Section 88 of the Finance (No. 2) Act, 1998 - Kar Vivad Samadhan Scheme - Assessment years 1990-91 to 1994-95 - Whether in view of section 88(a)(iv) of Kar Vivad Samadhan Scheme (KVSS) where tax arrear comprises of interest and penalty simpliciter, no interest is payable and all that declarant has to pay is 50 per cent of said penalty or interest determined before 31-3-1998 - Held, yes FACTS For the relevant assessment years, the petitioner was made liable to pay penalty. Subsequently, the Kar Vivad Samadhan Scheme, 1998 (KVSS) came into force. The petitioner made a declaration in respect of each of the relevant assessment years proposing to pay 50 per cent of the penalty in accordance with section 88(a)( iv) of the aforesaid Scheme. In pursuance of the aforesaid declaration, the department determined the sum payable by the petitioner by its order dated 23-2-1999 wherein it added 50 per cent interest on the amount of penalty under section 220(2) from the date when the penalty was levied, till 31-3-1998. The petitioner, by filing instant writ petition, challenged the addition of interest on ground that it was plainly contrary to the provisions of section 88 of the said Scheme and, therefore, the addition of interest was an act without jurisdiction and was liable to be set aside. HELD Section 88 of the Scheme contains a non obstante clause and excludes operation of all provisions contained in any other law or a direct tax enactment and provides that 'the amount payable under this Scheme by the declarant shall be determined at the rates specified hereunder' and 'in the case where tax arrear comprises only interest payable or penalty levied', the amount payable is 50 per cent thereof. This goes to show that the Scheme does not oblige the declarant to pay any amount on account of interest. The fact that interest is not intended to be paid would also be evident from the provision contained in sub-clause (iii) of clause (a). It would be appear that even in a case where the tax arrear includes income-tax, penalty and interest, the amount payable is the specified percentage of the disputed income in spite of the fact that the determination earlier made obliges the…

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