2011 (6) TMI 555 - AT - Income Tax

Whether provisions of section 234C are not attracted even though the cheques were realized after the due dates for payment of advance tax even though the assessee had deposited the cheques in the bank within time Held that - cheques were presented and deposited before the authorized banker within the due date of payment of advance tax. Cheques were admittedly encashed and amounts were realized subsequently. It is not the case of the revenue that the cheques were returned unpaid at any point of time.

Issues Involved:
- Interpretation of Section 234C regarding the calculation of interest on advance tax payments.
- Applicability of Central Government Treasury rules and Central Government Account (Receipts and Payments) rules, 1983.
- Validity of relying on CBDT Circular when rules were not operative.
- Comparison with a previous judgment by the Chennai Bench of ITAT.
- Date of payment for advance tax based on cheque clearance date or deposit date.

Interpretation of Section 234C:
The appeal involved a dispute over the interpretation of Section 234C regarding the calculation of interest on advance tax payments. The Revenue contended that interest should be calculated based on the date of cheque clearance, while the assessee argued that it should be based on the date of cheque deposit. The CIT (A) relied on a CB~T Circular and a Supreme Court decision to support the assessee's position, stating that if a cheque is honored on presentation, the date of payment relates back to the date of cheque presentation. The Tribunal upheld the CIT (A)'s decision based on various decisions of the jurisdictional High Court and the Bangalore Bench of the Tribunal, which established that the date of presentation of the cheque should be considered the date of payment for calculating interest under Section 234C.

Applicability of Government Treasury Rules:
The Revenue raised a concern regarding the applicability of the Central Government Treasury rules and the Central Government Account (Receipts and Payments) rules, 1983. They argued that the CIT (A) erred in relying on a judgment related to the period when the Treasury rules were in operation, which were later replaced by the 1983 rules. However, the Tribunal found that the CB~T Circular clarifying the date of payment concerning honored cheques was still valid, and the Supreme Court and High Court decisions supported the interpretation that the date of presentation should be considered the date of payment.

Validity of CBDT Circular and Previous Judgments:
The Revenue further contested the reliance on a CBDT Circular issued when the Central Government Account (Receipts & Payments) Rules, 1983 were not operative. However, the Tribunal upheld the CIT (A)'s decision based on the continued validity of the CB~T Circular and established legal precedents supporting the interpretation that the date of presentation of the cheque determines the date of payment for advance tax calculations under Section 234C.

Comparison with Previous Judgment:
The Revenue highlighted a judgment by the Chennai Bench of ITAT in a different case, where a decision favored the department on a similar issue. Despite this, the Tribunal in the current case relied on the decisions of the jurisdictional High Court and the Bangalore Bench of the Tribunal, which consistently supported the interpretation that the date of presentation of the cheque should be considered the date of payment for calculating interest under Section 234C.

Date of Payment for Advance Tax:
The central issue revolved around determining the date of payment for advance tax, specifically whether it should be based on the cheque clearance date or the cheque deposit date. The Tribunal, in alignment with previous legal precedents and decisions, concluded that the date of presentation of the cheque should be the determining factor for calculating interest under Section 234C. As the cheques in question were presented and deposited within the due date, and subsequently encashed without being returned unpaid, the Tribunal upheld the CIT (A)'s decision and dismissed the appeal filed by the Revenue.

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