Thursday, November 20, 2008

What Is The Date Of Payment-the day you present cheque or the day cheque is honoured?

Which date will be taken as deposit of ESI and/or EPF , the day when cheque is been deposited in bank for this purpose or the date it got cleared. suppose on 15th June ,I deposited EPF through Cheque which got cleared on 20th June. Then as per IT Act what would be the date of submission for the purpose of Scrutiny.

Under I T Act , the position regarding this question was very clear by virtue of CBDT Circular No. 261 dated 8-8-1979 , that the date of presentation of the cheque or draft to the bank will be the date of payment of amounts which is required to be done through cheque or draft . For example , Income tax Act makes it mandatory to pay be cheque or draft , any sum exceeding Rs 20000 u/s 40A(3) or 269SS or 269T . Apart from that assessee makes payments of TDS/TCS or amounts pertaining to section 43B .

Negotiable Instrument Act 1881 however the date of payment relates back to the date of presentation of the cheque provided the cheque was honoured on its presentation.

Controversy arose because of Rule 20(1) of Central Government Account (Receipts and Payments) Rules, 1983 which says that when the payment was made by cheque or draft, the payment shall be deemed to have been made on the date on which it was cleared and entered in the receipt scroll.

Therefore at one hand there is confilct between a Central Act (Negoitable Instrument Act ) and a rule framed by executive body (Rule 20(1) ) of CGAR , on the other hand there is circular no 261 whihc was not withdrawn by CBDT even after the framing of rule 20(1) .

Which one to follow-Law by Parliament or Rules Framed by Executives?

As stated above , there is conflict of law between Negotiable Instrument Act and the Rule 20(1) of CGAR on this issue. So , following judgment of Supreme Court held that in case of conflict between Central Act and the Rules framed by Executives, it is the Central Act which will prevail.

1. K. Saraswathy v. P.S.S. Somasundaram Chettiar [1989] 4 SCC 527.
2. Virender Singh Hooda v. State of Haryana AIR 2005 SC 137.
3. Tamil Nadu Housing Board v. N. Balasubramanium [2004] 6 SCC 85.


Therefore , it is clear that the date of presentation will be the date of payment, provided cheque or draft is not dishonoured.

The controversy was the subject matter before P.L Haulwel vs CIT 100 ITD 485, [2006] which threadbare discussed the matter . The Tribunal (Chennai Bench) held as under

"the Authority for Advance Rulings in a case reported in 221 ITR 172 considered an identical situation. In the case before the Authority for Advance Rulings, the assessee originally deposited the cheque on 15-3-1994. However, the same was returned unpaid. The cheque was again presented on 15-4-1994 which was honoured on 16-4-1994. The assessee claimed before the Authority for Advance Rulings that the payment should relate back to the date of original presentation. The Authority for Advance Rulings held that the contention of the assessee cannot be accepted. After referring to the Central Government Account (Receipts and Payments) Rules, 1983 and the CBDT circular, ultimately concluded that the payment can be said to have been made at the earliest on 15-4-1994 when the cheque was redeposited for second time. This decision of the Authority for Advance Rulings also supports the case of the assessee. The decision of the Authority for Advance Rulings clearly shows that the date of presentation of the cheque would be the date of payment provided the cheque was honoured on presentation."

21. In the case before us, admittedly, the cheques were presented and deposited before the authorised banker within the due date for payment of advance tax. The cheques were admittedly encashed and the amounts were realised subsequently. It is not the case of the Revenue that the cheques were returned unpaid at any point of time. In those circumstances, as held by the Authority for Advance Rulings, the date of payment should be taken as date of presentation of the cheques. The Apex Court as well as Madras High Court have also taken similar view after interpreting sections 10 and 82 of the Negotiable Instruments Act, 1881. Therefore, in our opinion, the date of presentation should be taken as date of payment since admittedly, the cheques were honoured.

6 comments:

Suresh Kumar said...

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kamlesh said...

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tapas said...

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TAPAS

Rinesh Sanghavi said...

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sunil said...

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Regards

CA Sunil Bhatia

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