2020 (8) TMI 665 - AT - Income Tax

Appeals partially allowed: Interest recalculated based on cheque presentation date, not clearance date.

Standard Chartered Bank Versus DCIT (TDS) -2 (2), Mumbai

The Tribunal partially allowed the appeals, directing the interest under section 201(1A) to be recalculated based on the date the cheques were presented ... Levy of Interest u/s 201(1A) for late deposit of Tax Deducted at Source - cheque towards the amount of TDS was tendered by the assessee to the government bank within the stipulated time period OR not? - delay on the part of the bank or the clearing house in making the remittance - HELD THAT:- After going through the cited order of this Tribunal in Oil and Natural Gas Corporation Ltd. V/s DCIT [2018 (12) TMI 286 - ITAT MUMBAI] we find that identical factual matrix as well as controversy has been dealt by the Tribunal and ultimately the issue has been decided in assessee’s favour as held as the assessee had admittedly tendered the cheque with the bank well within the stipulated 'due date', therefore, it cannot be held as being in default for the delay on the part of the bank or the clearing house in making the remittance of the said amount to the Government Account. Circular No. 261, dated 08/08/1979 issued by the CBDT, unless withdrawn or amended, would hold the ground and would be binding on the revenue. Payment would be deemed to have been made on the date the cheque was handed over to the banker and the date of payment was to be taken as the date of presentation of the cheques by the assessee. It also supports the proposition that the payment would relate back to the date of presentation of cheque unless the cheque is dishonored. The binding decisions cited by the assessee before Ld. CIT(A) also supports the said proposition. Similar view has been taken in ITO V/s Broadcom Communication Technology Pvt. Ltd. 2015 (10) TMI 2295 - ITAT BANGALORE]. No contrary decision is on record. Respectfully following the ratio of all these decisions, we hold that payment of TDS by the assessee would relate back to the date of presentation of cheques by the assessee to the banker. Accordingly, TDS-CPC, Ghaziabad is directed to revise the aforesaid intimation by taking the date of tender of cheques by the assessee as the actual date of payment and re-compute interest payable by the assessee, if any. The interest demand u/s 220(2) being consequential in nature, may also be recomputed. Resultantly, the appeal stands allowed to the extent indicated in the order. Issues Involved:1. Levy of Interest Under Section 201(1A) for late deposit of Tax Deducted at Source (TDS).2. Levy of Interest for two months under Section 201(1A).Detailed Analysis:1. Levy of Interest Under Section 201(1A) for Late Deposit of TDS:- Facts: The assessee received an intimation under section 154 of the Income-tax Act, 1961, from TDS-CPC, Ghaziabad, for late payment of TDS for Quarter-1 of Financial Year 2007-08. The intimation included an interest charge of Rs. 42,09,766 under section 201(1A) and Rs. 1,68,388 under section 220(2), totaling Rs. 43,78,154.- Assessee's Argument: The assessee argued that TDS was deposited by cheque on or before the due date (7th of the following month) and that the date of deposit should be considered as the date of tendering the cheque, not the date of its clearance. The assessee relied on various judicial decisions and CBDT Circular No. 261 dated 08/08/1979, which stated that the date of tendering a cheque is deemed to be the date of payment if the cheque is honored.- CIT(A)'s Decision: The CIT(A) held that interest under section 201(1A) is leviable from the date of deduction to the date the tax is actually credited to the government's account. The CIT(A) rejected the reliance on the old CBDT Circular No. 261, stating it was based on outdated treasury rules replaced by the Central Government (Receipt and Payment) Rules, 1983, which consider the date of cheque clearance as the payment date.- Tribunal's Decision: The Tribunal found in favor of the assessee, citing a coordinate bench's decision in Oil and Natural Gas Corporation Ltd. v. DCIT, which held that unless withdrawn, CBDT Circular No. 261 remains binding. The Tribunal ruled that the payment date should be the date the cheque was presented to the bank, not the clearance date, and directed TDS-CPC to revise the interest calculation accordingly.2. Levy of Interest for Two Months:- Facts: The assessee contended that the CIT(A) erred in confirming the interest levy for two months when the delay was less than 30 days.- Assessee's Argument: The assessee argued that interest should be levied for only one month if the delay is less than 30 days.- CIT(A)'s Decision: The CIT(A) upheld the levy of interest for two months without addressing the specific argument about the delay period.- Tribunal's Decision: The Tribunal did not specifically address this issue separately but allowed the appeal based on the primary argument regarding the date of cheque presentation.Conclusion:The Tribunal allowed the appeals to the extent that the interest under section 201(1A) should be recalculated based on the date the cheques were presented to the bank, not the clearance date. The interest under section 220(2) is to be recomputed accordingly. The Tribunal's decision is consistent across all four quarters of Financial Year 2007-08, leading to the same outcome for each appeal.Order Pronounced:All the appeals stand partly allowed to the extent indicated in the order, pronounced on 21st August 2020.