Interest in DRC 07

[SANTOSH PATIL]

Sir, If in DRC 01 tax is mentioned and interest as per applicable rate u/s 50 then can department demand interest in DRC-07 Order or they had to quantify interest amount in SCN DRC 01

[KASTURI SETHI]

Interest cannot be quantified either in SCN or Order-in-Original inasmuch as interest is to be computed up to the date of payment of tax which was not paid within due time. So the quantification cannot be done in advance. If done, that will not be complete and correct. So the exact amount of interest to be paid can be calculated/ascertained only on the date of payment of tax.

[Amit Agrawal]

Section 75(7) reads as follows: The amount of tax, interest and penalty demanded in the order shall not be in excess of the amount specified in the notice and no demand shall be confirmed on the grounds other than the grounds specified in the notice.

Section 75(9) reads as follows: The interest on the tax short paid or not paid shall be payable whether or not specified in the order determining the tax liability.

[Padmanathan KV]

Learned friend Amit JI,

Soliciting your views on the following for the benefit of querist and readers:

Section 75(9) is restricted to tax short paid or not paid.

Thus, Section 75(9) does not cover cases of ITC wrongly utilized (as wrongly availed is now dealt by Rule 88B) and tax erroneous refunded. Therefore, due to specific absence of these cases in section 75(9), the quantification of interest in DRC-07 is mandatory for ITC wrongly utilized and tax erroneous refunded? (Also another issue is section 50 does not cover tax erroneous refunded. So the levy of interest itself is in question.)

With respect to the query here, section 75(9) does not mandate quantification of interest in Notice, though section 75(7) requires so. And will it be covered by Section 160(1), if a view is taken that it is mandatory to quantify interest in SCN?

[Amit Agrawal]

@ Shri Padmanathan Ji,

W.r.t. your last post, my views are as under:

A. In subject query, there was demand raised for interest u/s 50 in the SCN, though same is not quantified.

B. I think that same is sufficient compliance of Section 75(7) read with Section 160(1).

B1. This is more so, if subject issue under dispute (tax short paid / tax not paid / ITC wrongly availed & utilised, as the case may be) is not paid by the tax-payer before SCN.

P.S. W.r.t. larger issues raised by you specially with regard to Section 75(9), lets deal with them as and when proper query gets presented itself on this TMI forum.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

AI Summary

Interest quantification may be deferred until payment, while notice limits restrict demands to specified grounds and amounts. Interest cannot be precisely quantified until the date of payment, so notices commonly state interest as leviable under the relevant provision without exact computation. Notice rules limit orders to amounts and grounds specified, yet a statutory provision makes interest on short-paid or unpaid tax payable whether or not specified in the order. For tax shortfalls, mentioning interest in the notice without quantification is generally treated as sufficient if tax remains unpaid; for wrongly utilised ITC and erroneous refunds, quantification in DRC-07 and the very basis for interest may be mandatory and require separate analysis.