No TDS late deposit interest if cheque deposited in bank within due date in view of CBDT Circular No. 261 dated 08-08-1979 which has not been withdrawn- ITAT
ABCAUS Case Law Citation:
969 2016 (07) ITAT
Assessment Year: 2009-10
Date/Month of Judgment/Order: June, 2016
Brief Facts of the Case:
The appellant assessee (NHAI) was an Autonomous Body under the Ministry of Road Transport & Highways, Govt. of India and engaged in the business of construction of National Highway. During the course of assessment proceedings, Assessing Officer observed that in twenty instances there was a delay in making the payment of TDS amount as stipulated u/s 201 of the Income Tax Act, 1961. Out of the said twenty instances in fifteen cases, the cheque for TDS was deposited in the bank within the stipulated time (on or before 7th of the next month) but the the credit was given by the bank after the due date on account of time taken in clearing of cheques.
However the AO imposed interest for all twenty instances on account of late deposit of Tax Deposited at Source u/s 201(1)/201(1A).
Aggrieved, the assessee preferred an appeal before CIT(A) who confirmed the action of AO. Being aggrieved by the order of CIT(A) the assessee went in second appeal before the Tribunal.
Contentions of the Assessee:
The assessee submitted that TDS amount was deposited before due date on 06.11.2008 through cheque drawn on Axis Bank but the credit was given on 08.11.2008. Similarly, TDS pertinent to month of November cheque was issued on 05.12.2008 but credit was given on 10.12.2008 however, in some cases, the TDS pertaining to month of November, cheque was issued on 10.12.08 after its due date. In all the cases, cheques were deposited in the Axis Bank which is authorized bank for the collection of government taxes. The assessee quoted that in terms of Circular No. 232 [F.No.385/79/77-IT(B)], dated 26-11-1997. There was no delay on the part of assessee for making the payment of TDS on its due date. Time taken by bank in giving credit after the due date due to its clearing processing was no fault on the part of assessee. Therefore, the assessee should not be penalized.
Observations made by ITAT:
The Tribunal noted that Central Board of Direct Taxes, in excise of powers conferred under the Income tax Act, 1961 issued Circular No.261 dated August 8, 1979 clarifying that in case of payment of cheque/draft, if honored, the date of payment would relate back to the date of handing over of cheque/draft to the government’s bankers.
Central Government Account (Receipts and Payments) Rules 1983
The said rules which were framed subsequent to the said CBDT Circular provide that date of payment for government dues tendered in form of cheque/draft shall be the date on which it was cleared and entered in the receipt scroll.
However the Tribunal noted after framing the rules, the circular no. 261 should have been withdrawn by CBDT but the same was not withdrawn. Thus the issue was whether the CBDT Circular which was issued in the context of the Old Rules would still hold good after enforcement of the 1983 Rules.?
The Tribunal relied on the judgment in PL Haulwel Trailers Ltd v DCIT  100 ITD 485 (Chennai) which also had an occasion to dwell on the issue as in the present case and duly considered the conflict between the Rules, Circular and the provisions of Negotiable Instruments Act, 1881 as under:
- CBDT Circular, which was issued by the apex administrative body under the Income-tax Act, 1961, was not withdrawn after the Rules were framed, i.e. it still holds good and would hence be binding on the Income-Tax authorities in preferences to any other executive instruction issued by any other authority
- As cheques were presented and deposited with the authorized banker within the due date and encashed subsequently, date of tender of the cheque should be taken as the date of payment.
- The Negotiable Instruments Act, 1881 provides that once the cheque is encashed in ordinary course, it will discharge the drawer from payment which is in apparent conflict with the said Rules framed by executive authorities in exercise of powers under Article 283(1) of the Constitution of India. In such a scenario, the law enacted by the Parliament would prevail i.e. Negotiable Instruments Act, 1881 would prevail over the Rules.
- CBDT has clarified in its Circular No 678 of January 14, 1994, that if the last date for payment is a holiday, Section 10 of the General Clauses Act, 1897 will be applicable and, accordingly, the assessee can make the payment on the next immediately following working day.
- If there is a clear provision under the any act/rules./circular/notification/press release then they prevails and cheque tender date will be treated as payment date. If there is no such clear provision than for government due “Central Government Account (Receipts and Payments) Rules 1983 “will apply according to which the date of payment of government dues tendered in form of cheque/draft shall be the date on which it was cleared and entered in the receipt scroll;
Following the judgment in PL Haulwel Trailers Ltd (supra) and relying on the judgment of the Supreme Court in CIT v. Nenmony Investments & Agencies Ltd. (1978) 113 ITR 354 the Tribunal allowed the assessee’s appeal.