1986 (4) TMI 91 - AT - Income Tax

Summary

Issues:
- Entitlement to interest under section 214 on excess advance tax paid.

Analysis:
The appeal before the Appellate Tribunal ITAT Bombay-C involved a dispute regarding the entitlement to interest under section 214 of the Income-tax Act, 1961 on excess advance tax paid by a limited company. The case originated when the Income-tax Appellate Commissioner (IAC) did not allow interest on the excess advance tax paid by the company, leading to an application for rectification of assessment. The Commissioner (Appeals) later held in favor of the assessee, stating that the date of payment is when the cheques are presented and accepted, not when they are encashed. The Commissioner found that the cheques for the advance tax installments were presented before the due dates, making the company eligible for interest under section 214. The revenue appealed this decision before the ITAT.

The revenue, represented by the departmental representative, argued that as per rulings of various High Courts, if advance tax is paid after the due dates, interest under section 214 is not applicable. The representative contended that the Commissioner's decision was erroneous and should be reversed. On the other hand, the assessee's counsel argued that the payments were made before the due dates by cheques drawn on local banks, in line with the Board's circular. Referring to relevant case law, the counsel asserted that the company should be allowed interest on the excess advance tax paid, as directed by the Commissioner (Appeals).

The ITAT carefully considered the submissions and highlighted the Board's circular dated 1-6-1965, which specified that the date of payment for cheques drawn on local banks is the date of presentation, not encashment. The ITAT emphasized that circulars issued by the Board are binding on tax authorities. The tribunal noted that the Income-tax Department accepted the cheques a few days before the due dates and should have sent them for encashment promptly, as per the circular. Despite lack of evidence on the exact date of presentation to the Reserve Bank, the ITAT presumed that the authorities followed the circular. Consequently, the ITAT upheld the Commissioner's decision, stating that the company was entitled to interest under section 214 on the excess advance tax paid. The appeal by the revenue was dismissed, affirming the Commissioner's order in favor of the assessee.