Tribunal Rules TDS Payment Date is Cheque Tendering Date; Interest on Delayed Deposit Deleted Based on Binding Circular.

The tribunal held that the rectification petition under section 154 of the Income Tax Act was maintainable, as CBDT Circular No. 261 is binding on the Department. It determined that the date of tendering a cheque is the date of TDS payment, provided the cheque is honoured. Consequently, the tribunal directed the deletion of interest levied under section 201(1A) for alleged delay in TDS deposit. The tribunal set aside the impugned order and allowed the assessee's appeals, applying the findings in ITA No. 1024/Mum/2019 to related appeals for consistency. The order was pronounced on May 6, 2021.

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Issues Involved:
1. Maintainability of rectification petition under section 154 of the Income Tax Act.
2. Determination of the date of deposit of TDS amount through cheque: whether it is the date of tendering the cheque or the date of realization of the cheque.

Issue-wise Detailed Analysis:

1. Maintainability of Rectification Petition under Section 154:

The assessee filed a rectification petition under section 154 of the Income Tax Act, seeking correction in the date of tendering/deposit of TDS challans along with the cheque. The primary contention was that the date of tendering the cheque should be considered as the date of payment, as per CBDT Circular No. 261 dated 08/08/1979, which states that if a cheque or draft tendered in payment of Government dues is honoured on presentation, the payment is deemed to have been made on the date it was handed over to the Government banker.

The CIT(A) dismissed the rectification petition, deeming it not maintainable as the issue was considered debatable. However, the tribunal held that the CBDT Circular No. 261 is binding on the Department until withdrawn. The Supreme Court has consistently held that CBDT Circulars are binding on the Department. Therefore, the tribunal concluded that the rectification petition under section 154 was maintainable, as the Department is bound by the circular, which clearly states that the date of tendering the cheque is the date of payment. The tribunal allowed the ground raised by the assessee regarding the maintainability of the rectification petition.

2. Determination of the Date of Deposit of TDS Amount:

The second issue was whether the date of deposit of TDS amount through cheque should be the date of tendering the cheque or the date of its realization. The tribunal referred to several judicial decisions, including the Supreme Court's ruling in CIT vs. Ogale Glass Works Ltd., which held that the date of payment is the date of delivery of the cheque, provided the cheque is honoured on presentation. Similarly, the tribunal cited cases like Raunaq Education Foundation and REPCO Home Finance Ltd., which supported the view that the date of tendering the cheque is the date of payment.

The tribunal also considered the Co-ordinate Bench's decision in ONGC vs. DCIT, which after analyzing CBDT Circular No. 261 and the Central Government Account (Receipts & Payments) Rules 1983, concluded that the date of tendering the cheque should be deemed as the date of deposit. The tribunal emphasized that the Department is bound by the CBDT Circular, which has not been withdrawn and thus remains effective.

Consequently, the tribunal held that the TDS deducted under sections 194C and 194J of the Act was deposited by the assessee through cheque to the Government’s Banker before the due date. Therefore, no interest under section 201(1A) for the alleged delay in deposit of TDS amount is chargeable to the assessee. The tribunal directed the deletion of the interest levied under section 201(1A) of the Act.

Conclusion:

The tribunal set aside the impugned order and allowed the appeals of the assessee. The tribunal's findings in ITA No. 1024/Mum/2019 were applied mutatis mutandis to the other appeals (ITA Nos. 1025 to 1031/Mum/2019), which were also allowed for parity of reasons. The order was pronounced in open court on May 6, 2021.

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