Law:

Section:

Section 214, read with section 139(8) of the Income-tax Act, 1961 - Advance tax - Interest payable by Government - Assessment year 1974-75 - Towards last instalment of advance tax due on 15-3-1974, assessee remitted cheque on 13-3-1974 which was credited to Government on 16-3-1974 - Whether, in law, date of payment is date of delivery of cheque - Held, yes - Whether, therefore, aforesaid payment had been made within prescribed time, and consequently, no interest was leviable under section 139(8) - Held, yes - Whether, since assessment resulted in refund, assessee was entitled to interest under section 214 on excess tax paid - Held, yes FACTS Towards the advance tax due for the assessment year 1974-75, the assessee had remitted a cheque on 13-3-1974, which was credited to Government on 16-3-1974. While computing the interest under section 139(8), the ITO did not give deduction to the advance tax paid towards the last instalment due on 15-3-1974. The assessment resulted in a refund and the assessee also claimed interest under section 214 on the excess tax paid. The ITO did not allow interest on the excess advance tax paid on the ground that the payment of advance tax was belated and hence it could not be considered as an advance tax paid for purposes of section 139(8) and section 214. The AAC upheld the claim of the assessee both as regards interest levied under section 139(8) as well as claim for interest under section 214. The Tribunal agreed with the view taken by the AAC. On reference: HELD There can be no dispute that a payment by cheque relates back to the date of receipt of the cheque by the payee and in law the date of payment is the date of delivery of cheque. It, therefore, followed that the assessee when he tendered the cheque on 13-3-1974 itself, made a valid payment. It followed, as a consequence, that the assessee would be entitled to interest under section 214 on the excess of the tax paid as determined on the regular assessment. Further, in view of the decision in National Products v. CIT [1977] 108 ITR 935 (Kar.), the appeal challenging the levy of interest, was maintainable and the AAC was right in entertaining the appeal on that point. Note:…

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