2017 (10) TMI 1679 - AT - Income Tax

Cheque tender date counts as TDS payment date when honoured, avoiding interest for delayed deposit.

For interest under section 201(1A), the date of payment of TDS by cheque is the date the cheque is tendered to the bank, not the date of debit or challan ... Deemed date of payment by cheque - Interest under section 201(1A)Deemed date of payment by cheque - Late deposit of TDS - Interest under section 201(1A) - Interest under section 201(1A) was leviable where TDS cheques were tendered to the bank on the due date but were realised and challans generated on the following day. - HELD THAT: - The Tribunal held that where payment is made by cheque and the cheque is subsequently honoured, the date of payment relates back to the date of tender of the cheque. On the material before it, including the banker's certificate and the pay-in-slips, it found that the cheques had been deposited on the due date and were realised on the next day without dishonour. Applying the principle recognised in DIT(E) Vs. Raunaq Education Foundation and CIT Vs. Ogale Glass Works Ltd. , read with the CBDT circular referred to in the order, the Tribunal concluded that the assessee had discharged its obligation within time and that the system-driven levy of interest by treating the realisation date as the payment date was unsustainable. [Paras 5, 6, 10, 11]The interest charged under section 201(1A) was deleted, the assessee's appeal was allowed, and the revenue's appeal was dismissed.Final Conclusion: The Tribunal held that, since the TDS cheques were tendered on the due date and were subsequently honoured, the payment had to be treated as made on the date of tender itself. Consequently, no interest under section 201(1A) was chargeable. Issues: Whether, for levy of interest under section 201(1A), the date of payment of TDS paid by cheque is the date on which the cheque is tendered to the bank or the date on which the amount is debited and challan is generated.Analysis: The due date for deposit had to be tested against the actual legal effect of payment by cheque. The bank certificate and surrounding records showed that the cheques were tendered within time, were ultimately honoured, and were not dishonoured. On this footing, the legal principle applied was that payment by cheque is a conditional payment and, when honoured, relates back to the date of delivery. The relevant CBDT circular and section 46 of the Negotiable Instruments Act, 1881 supported the view that tender of the cheque constitutes the date of payment for this purpose.Conclusion: The date of tender of the cheque was treated as the date of payment, so no interest under section 201(1A) was leviable for default beyond the due date. The assessee succeeded and the Revenue failed.