2014 (11) TMI 487 - HC - Income Tax

Calculation of interest u/s 234C Date of presentation of cheque - Whether interest u/s 234C of the Act is to be calculated based on date of clearing of the cheque or date of presentation of the cheque Held that - Following the decision in Commissioner of Income Tax v. Ogale Glass Works Ltd. 1954 (4) TMI 3 - SUPREME Court - none of the cheques has been dishonoured on presentation and payment cannot, therefore, be said to have been defeated by the happening of the condition subsequent, dishonour by non-payment and that being so there can be no question, that the assessee did not receive payment by the receipt of the cheques - The position is that there was an implied agreement under which the cheques were accepted unconditionally as payment and on another view, even if the cheques were taken conditionally, the cheques not having been dishonoured but having been cashed, the payment related back to the dates of the receipt of the cheques and in law the dates of payments were the dates of the delivery of the cheques - Once the cheque issued by the assessee is encashed, the payment relates back to the date of receipt of the cheque no substantial question of law arises for consideration Decided against revenue.

Summary

Issues:
Interpretation of Section 234C of the Income Tax Act regarding the calculation of interest based on the date of clearing of the cheque or the date of presentation of the cheque.

Analysis:
The appeal before the High Court challenged the order of the Income Tax Appellate Tribunal regarding the calculation of interest under Section 234C of the Income Tax Act for the assessment year 2009-2010. The core issue was whether the date of presentation of the cheque or the date of clearing of the cheque should be considered for calculating advance tax payment. The Commissioner of Income Tax (Appeals) had held that the date of presentation of the cheque should be treated as the date of payment of tax, leading to the disallowance of interest under Section 234C. The Tribunal upheld this decision, prompting the Revenue to file the current appeal.

The High Court referred to the Supreme Court's decision in Commissioner of Income Tax v. Ogale Glass Works Ltd., which clarified that a payment by negotiable instrument is conditional, subject to the cheque being dishonored on presentation. If the cheque is not dishonored, the payment is considered effective from the delivery of the cheque. The Court also cited the case of Director of Income Tax v. Raunaq Education Foundation, which reiterated this principle.

In the present case, since the department did not claim that the cheque issued by the assessee was dishonored, and it was encashed, the Court concluded that the payment should be related back to the date of receipt of the cheque. Therefore, based on the legal precedents and the absence of dishonor of the cheque, the High Court found no substantial question of law for consideration and dismissed the appeal.

In summary, the High Court upheld the Tribunal's decision that the date of presentation of the cheque should be considered as the date of payment of advance tax for the purpose of calculating interest under Section 234C of the Income Tax Act. The Court relied on established legal principles regarding negotiable instruments and payment conditions, as clarified by relevant Supreme Court judgments, to reach this conclusion.