2016 (8) TMI 550 - AT - Income Tax

Tribunal rules in favor of appellant on interest for late TDS deposit

The Tribunal allowed the appellant's appeal, ruling that if the cheque was deposited with the bank on or before the 7th day of the following month in ... Interest on account of late deposit of TDS u/s. 201(1)/201(1A) - Held that:- In the instant case, assessee has deposited the TDS amount on or before 7th day of next month in each tax was deducted. In the similar facts and circumstances, various courts have decided the issue in favour of assessee in the case of CIT v. Nenmony Investments & Agencies Ltd. (1977 (11) TMI 45 - KERALA High Court ) to reach to the conclusion that the cases where the cheque had been deposited with the bank or before 7th day of next month in which TDS was deducted no interest will be chargeable. The AO accordingly directed. Hence, this ground of assessee is allowed. Issues involved:1. Appeal against the order of Commissioner of Income Tax (Appeals) regarding the imposition of interest on late deposit of Tax Deducted at Source (TDS) under section 201(1)/201(1A) of the Income Tax Act, 1961.2. Interpretation of rules and circulars regarding the date of payment for government dues tendered in the form of cheque/draft.Detailed Analysis:1. The appellant challenged the order of the Commissioner of Income Tax (Appeals) regarding the imposition of interest on late deposit of TDS under section 201(1)/201(1A) of the Income Tax Act, 1961. The appellant contended that the order was arbitrary, illegal, and bad in law. The core issue was whether the interest levied on the late deposit of TDS was justified. The Assessing Officer had imposed interest due to a delay in TDS payment, which was confirmed by the Commissioner of Income Tax (Appeals) based on a previous ITAT Agra Bench order. The appellant argued that the TDS amount was deposited before the due date, but the credit was given by the bank after the due date, leading to the delay. The appellant relied on Circular No. 232, dated 26-11-1997, which stated that the date of payment related back to the date of handing over the cheque/draft to the government's bankers. The appellant contended that there was no delay on their part in making the TDS payment, and the delay was due to the bank's processing time. The appellant sought relief from the interest imposed.2. The second issue involved the interpretation of rules and circulars regarding the date of payment for government dues tendered in the form of cheque/draft. The Tribunal analyzed the Central Board of Direct Taxes Circular No. 261, dated August 8, 1979, and the Central Government Account (Receipts and Payments) Rules 1983. The Tribunal referred to a Chennai Tribunal judgment in the case of PL Haulwel Trailers Ltd v DCIT [2006] 100 ITD 485, which emphasized the binding nature of the Circular issued by the apex administrative body under the Income-tax Act, 1961. The Tribunal noted a conflict between the Circular, Rules, and the Negotiable Instruments Act, 1881. It was observed that the Circular remained valid even after the enforcement of the 1983 Rules, and it would prevail over any other executive instruction. The Tribunal concluded that the date of tender of the cheque should be considered as the date of payment if the cheque was presented and deposited within the due date, even if it was encashed subsequently. The Tribunal highlighted that the law enacted by Parliament would prevail over the Rules. The judgment clarified that if there is a clear provision under any act/rules/circular/notification, it would prevail, and the cheque tender date would be treated as the payment date unless specified otherwise.In conclusion, the Tribunal allowed the appellant's appeal, emphasizing that in cases where the cheque had been deposited with the bank on or before the 7th day of the next month in which TDS was deducted, no interest would be chargeable. The Tribunal's decision was based on the interpretation of relevant rules, circulars, and legal precedents, providing relief to the appellant in the matter of interest on late TDS deposit.