Cheque tender date governs TDS interest when Government dues are paid on time and bank clearance is delayed.

For Government dues paid by cheque, a duly honoured cheque tendered to the authorised bank within time is treated as payment on the date of tender, not the later clearance date. On that principle, interest under section 201(1A) on TDS cannot be levied merely because banking or clearing delayed credit to the Government account. The consequential demand under section 220(2) depends on the correct computation of the primary interest levy and must be recomputed accordingly. The discussion applies CBDT Circular No. 261, banking and treasury payment rules, and prior judicial authorities to the computation of cheque-based tax payments.

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Issues: Whether interest under section 201(1A) of the Income-tax Act, 1961 was leviable when TDS cheques were tendered to the authorised bank within the prescribed due date but were credited to the Government account on a later date, and whether the consequential interest under section 220(2) could survive.

Analysis: The payment issue was examined in the light of CBDT Circular No. 261 dated 08.08.1979, the banking and treasury payment rules, and prior judicial authorities. The controlling principle applied was that where a cheque tendered towards Government dues is honoured, the payment relates back to the date on which the cheque is handed over to the Government banker. The later clearance date attributable to the bank or clearing process does not, by itself, render the deductor in default for the period of delay. Since the demand under section 220(2) was consequential to the interest computed under section 201(1A), its fate depended on the correct recomputation of the primary levy.

Conclusion: Interest under section 201(1A) was not to be computed by reference to the cheque clearance date where the cheque was tendered within time and honoured. The matter was directed to be reworked on the basis of the date of tender of the cheques, and the consequential interest under section 220(2) was also to be recomputed.

Final Conclusion: The appeals were allowed in part by granting relief on the computation of TDS interest and by requiring recomputation of the consequential demand.

Ratio Decidendi: For Government dues paid by cheque, a duly honoured cheque tendered within the prescribed time is treated as payment on the date of tender, and interest for delay cannot be levied merely because the banking clearance occurred later.

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