M/S NHAI,SILIGURI vs. A.C.I.T,(TDS),, SILIGURI

This appeal by the assessee is against the order of Commissioner of Income Tax (Appeals), Siliguri dated 18.06.2013. Assessment was framed by ACIT(TDS), Siliguri u/s 201(1)/201(1A) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 26.03.2013 for assessment year 2009-10.The grounds raised by assessee per its appeal are as under:- “1. For that the order of the Ld. CIT(A) is arbitrary, illegal and bad in law.

For that on the facts and circumstances of the case the order of the CIT(A) be modified and the assessee be given the relief prayed for.“ Shri S.M.Surana, L’d Authorized Representative appeared on behalf of assessee and Shri Sauraabh Kumar, L’d Departmental Representative appeared on behalf of Revenue.

The inter-connected common issue in all the grounds of assessee is that L’d CIT(A) erred in confirming the action of Assessing Officer by imposing the interest of ₹1,17,310/- on account of late deposit of Tax Deposited at Source (TDS for short) amount u/s. 201(1)/201(1A) of the Act.

Facts in brief are that assessee in the present case is an Autonomous Body under the Ministry of Road Transport & Highways, Govt. of India and engaged in the business of construction of National Highway. During the course of assessment proceedings, Assessing Officer observed that there was a delay in making the payment of TDS amount as stipulated u/s 201 of the Act and details of TDS payment as under:-

Aggrieved, assessee preferred an appeal before L’d CIT(A) who confirmed the action of AO by having reliance in the order of ITAT Agra Bench dated of 08.06.2012 in the case of G.M.Mprrda, PIU v. ITO (TDS) in for A.Y. 2008-09 and by observing as under:- “Following the above order of the Hon'ble ITAT, Agra Bench I hold that the Ld ACIT, (TDS), Siliguri was justified in levying interest u/s. 201(1A) of the IT Act, 1961. I further hold that levy of interest u/s. 201(1A) is mandatory if TDS has not been actually paid to the Government account by the due date of deposit as per the relevant provisions of the Act. In the present case as the assessee M/s NHAI, v. ACIT (TDS) Slg. Page 4 has not actually paid TDS by the due date of deposit due to reasons of late clearing of cheques levy of interest u/s. 201(1A) of the Act n the assessee is fully justified. therefore, I am not inclined to interfere with the order of the Ld. ACIT (TDS), Siliguri u/s. 201(1)/201(1A) of the IT Act, 1961 for Form No.26Q for 3rd Quarter of Financial Year 2008-09.”

Before us L’d AR submitted that TDS amount was deposited before due date on 06.11.2008 vide cheque No.131217 drawn on Axis Bank but the credit was given on 08.11.2008. Similarly, TDS pertinent to month of November cheque was issued on 05.12.2008 but credit was given on 10.12.2008 however, in some cases, the TDS pertaining to month of Nov. cheque was issued on 10.12.08 after its due date. In all the cases, cheques were deposited in the Axis Bank which is authorized bank for the collection of government taxes. In terms of Circular No. 232 [F.No.385/79/77-IT(B)], dated 26-11-1997. There was no delay on the part of assessee for making the payment of TDS on its due date. However, the credit was given by the bank after the due date and that time was taken by bank in its clearing processing being no fault on the part of assessee. Therefore, the assessee should not be penalized.

We have heard the rival contentions and perused the materials available on record. From the foregoing discussion, we find that interest was imposed by AO on account of late deposit of tax and same was confirmed by L’d CIT(A) relying on the order of ITAT Agra Bench in the case of G.M.Mprrda, PIU (supra). From the facts of the case, we find M/s NHAI, v. ACIT (TDS) Slg. Page 5 that Central Board of Direct Taxes, in excise of powers conferred under the Income tax Act, 1961 issued Circular No.261 dated August 8, 1979 (CBDT Circular) in line with the above rules, clarifying that in case of payment of cheque/draft, if honored, the date of payment would relate back to the date of handing over of cheque/draft to the government’s bankers. However thereafter Central Government Account (Receipts and Payments) Rules 1983 Rules) were framed. These rules provide that date of payment for government dues tendered in form of cheque/draft shall be the date on which it was cleared and entered in the receipt scroll. However we find that after framing the rules, the circular no. 261 should have been withdrawn by CBDT but the same was not withdrawn. So In the backdrop of the above, an issue arises as to whether the CBDT Circular which was issued in the context of the Old Rules still holds good after enforcement of the 1983 Rules. The Chennai Tribunal (Tribunal), in a recent judgment, in the case of PL Haulwel Trailers Ltd v DCIT [2006] 100 ITD 485 (Chennai) had an occasion to dwell on the issue. The assessee, in this case, paid advance tax, for assessment year 1996-97, by depositing the cheques with the authorized bank within the due date. These cheques however, were realized after the due date. The assessing officer taking the actual date of realization of cheques, as the date of payment, levied interest for deferment of advance tax u/s. 234C of the Income-Tax Act 1961.The Tribunal observed that CBDT Circular, which was issued by the apex administrative body under the Income-tax Act, 1961, was not withdrawn after the Rules were framed, i.e. it still holds good and would hence be binding on the Income-Tax authorities in preferences to any other executive instruction issued by any other authority. The tribunal thus held that, as cheques were presented and deposited with the authorized banker within the due date M/s NHAI, v. ACIT (TDS) Slg. Page 6 and encashed subsequently, date of tender of the cheque should be taken as the date of payment. While rendering its decision, the tribunal has duly considered the conflict between the Rules, Circular and the provisions of Negotiable Instruments Act, 1881. Other than upholding the binding nature of the Circular, the tribunal has observed that under the Negotiable Instruments Act, 1881 it has been held that once the cheque is encashed in ordinary course, it will discharge the drawer from payment, and thus there exists an apparent conflict between interpretation of Negotiable Instrument Act, 1881 and the Rules which have been framed by executive authorities in exercise of powers under Article 283(1) of the Constitution of India. The Tribunal has thereafter, held that in such a scenario, the law enacted by the Parliament would prevail i.e. Negotiable Instruments Act, 1881 would prevail over the Rules. So ,One thing is clear that though the rules of central govt. has been changed but CBDT has not withdrawn the circular issued in this regard so it will binding on tax authority unless it withdrawn CBDT has clarified in its Circular No 678 of January 14, 1994, that if the last date for payment is a holiday, Section 10 of the General Clauses Act, 1897 will be applicable and, accordingly, the assessee can make the payment on the next immediately following working day and, in such cases, the mandatory interest leviable under Sections 234B and 234C would not be charged so we can some up the issue with the following that if there is a clear provision under the any act/rules./circular/notification/press release then they prevails and cheque tender date will be treated as payment date. If there is no such clear provision than for government due "Central Government Account (Receipts and Payments) Rules 1983 "will apply according to which the date of payment of government dues tendered in form of cheque/draft shall be the date on which it was cleared and entered in the receipt scroll; M/s NHAI, v. ACIT (TDS) Slg. Page 7 In the instant case, assessee has deposited the TDS amount on or before 7th day of next month in each tax was deducted. However, in some cases, tax was deposited late i.e. after due date. In the similar facts and circumstances, various courts have decided the issue in favour of assessee in the case of CIT v. Nenmony Investments & Agencies Ltd. (1978) 113 ITR 354, relying on the above judgment of Hon'ble Supreme Court we reach to the conclusion that the cases where the cheque had been deposited with the bank or before 7th day of next month in which TDS was deducted no interest will be chargeable. The AO accordingly directed. Hence, this ground of assessee is allowed.