Cheque payment date for advance tax interest is the date of presentation, not encashment, if the cheque is honoured.

For interest under Section 234C of the Income-tax Act, payment by cheque is treated as made on the date the cheque is delivered or presented, provided it is not dishonoured and is ultimately encashed. The Court applied the settled principle that a cheque is a conditional payment which, on clearance, relates back to the date of receipt. Accordingly, the relevant date for computing advance tax interest is the date of presentation, not the date of encashment, and no interest was payable on the footing that payment arose only on clearance.

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Issues: Whether, for the purpose of interest under Section 234C of the Income-tax Act, 1961, payment by cheque is to be treated as made on the date of presentation of the cheque or only on the date of encashment/clearance.

Analysis: The liability under Section 234C depended on the effective date of payment of advance tax. The Court applied the settled principle that payment by cheque is a conditional payment, and where the cheque is not dishonoured and is ultimately encashed, the payment relates back to the date on which the cheque was delivered/presented. The Court relied on the governing legal position that, in the absence of dishonour, the date of receipt of the cheque is treated as the date of payment.

Conclusion: The date of presentation of the cheque is the relevant date of payment for computing interest under Section 234C, and no interest was payable on the footing that payment arose only on clearance.

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