The window of the Direct Tax Dispute Resolution Scheme announced in the Budget FY17 opened on June 1, but experts reckon that the initial response to the scheme is lukewarm and list out several \u201cgrey areas\u201d and inadequacies that could prevent taxpayers from using it. Little are the chances of Vodafone or Cairn taking recourse to the scheme to settle their high-profile retrospective tax cases (the scheme envisages settlement of the cases with the firms concerned paying just the basic tax arrears sans penalty and interest), as the arbitration processes are under way. As for other cases, lacunae in the scheme could play spoilsport. Under the scheme, which will remain in force till December 31, disputes involving tax claims below `10 lakh pending before the commissioner-appeal (CIT-A) could be settled sans penalty if the principal tax amount and interest up to the assessment date are paid. For disputes of above `10 lakh, apart from tax and interest, 25% of the minimum penalty will also have to be paid to settle the dispute. In short, the scheme provides full immunity from penalty and prosecution in small cases. An attractive feature of the scheme is that only the tax with interest till the date of assessment order needs to be paid and not till date of actual payment of tax. But experts point out the scheme provides benefit only for litigation pending at the CIT-A whereas matters pending at higher levels are not covered. \u201cA taxpayer having litigation in various years at various forums or if the issue is repetitive may not like to opt for it as he has to continue the litigation in any case,\u201d said Prashant Khatore, tax partner, EY India. When cases involve relatively higher tax demands, payment of interest and partial penalty would lead to substantial cash outflow and many companies who feel they have a strong case to argue may not want to pay such large amounts, some analysts say. \u201cThere are a number of aspects of the scheme which lack clarity. To attain the desired objective, it is very important that these grey areas are clarified at the earliest,\u201d PwC pointed out in a recent report. Certain taxpayers with limited litigation capability such as time, cost and resources, however, may like to settle and buy peace with the department instead of continuing with the litigation which generally takes many years to settle. In case the litigation is due to interpretation issues, depending upon the quantum of tax dispute, many taxpayers might pay tax and interest upfront, but would not like to pay penalty (minimum 25% as per the scheme for tax demand above `10 lakh). The scheme does not provide settlement for select issues pending in litigation, thus, taxpayers who may not like to settle all issues but a few are unlikely to opt for it. Girish Vanvari, partner and head of tax at KPMG in India, feels that considering that most of the cases especially on account of retrospective amendments are at an advanced stage of litigation, many litigants may be apprehensive to own up to levy of tax, interest and partial penalty (which is to be paid), considering the magnitude of such payments and also, their initial contention questioning the validity of such tax levy. Also, when it comes to smaller cases pending at CIT (A) level, lack of clarity on how recurring issues pending for different assessment years and at different appellate levels will be dealt with, may pose a challenge. Tax experts say that there is ambiguity as to whether the scheme can be opted where tax and interest payment have already been made, for instance, cases under protest or liability covered by advance tax. In such a scenario, assuming that the scheme can be opted for where the disputed interest or penalty payment has already been made, it could be a challenge where 100% penalty payment has been made under protest, but as per the scheme, only 25% penalty is payable. Similarly, if interest is paid till the date of tax payment but as per the scheme, interest is payable up to the date of assessment.