Interest on failure to pay tax or penalty.

23. (1) If any amount, specified in a notice of demand issued under section 22, or directed to be deposited by an order passed under this Act, whether as tax or penalty or both, is not paid within a period of thirty days from the date of service of the notice or the supply of the copy of the order to the assessee, as the case may be, then, he shall be liable to pay in addition to the amount due from him simple interest on such amount at one-and-a-half per cent per month if the payment is made within ninety days but if the default continues thereafter, at three per cent per month for the period from the last date for the payment of the amount in time to the date he makes the payment:

Provided that where the recovery of any tax or penalty is stayed by the High Court or the Supreme Court, the amount of such tax or penalty shall be recoverable with simple interest at one-and-a-half per cent per month on the amount ultimately found due for the period the stay of recovery of the amount continued.

(2) The interest leviable under this Act shall not exceed the amount of tax or penalty on the non-payment or late payment of which such interest is charged.

(3) For the purpose of computation of interest payable under any provisions of this Act, rate of interest per month shall mean the rate per thirty-day period and interest for any shorter period shall be calculated proportionately and where the amount due on which interest is payable is paid in parts, the interest shall be computed separately for each part. Illustration: Rs.15,000 payable as tax upto 1st June, 2003, are paid as follows: Rs.5,000 on 28th May, 2003, Rs.3,646 on 10th August, 2003, Rs.2,348 on 15th October, 2003 and Rs.4,006 on 20th December, 2003, the interest payable on late payment shall be Rs.1,256 (rounded off), as shown below:–

5,000 01-06-03 28-05-03 Nil Nil

3,646 01-06-03 10-08-03 70 127.61

2,348 01-06-03 15-10-03 136 319.33

4,006 01-06-03 20-12-03 202 809.21

Total: 1,256.15