ITA No.- 5191/Del/2018
Pearey Lal & Sons Pvt. Ltd.

IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH: ‘F’: NEW DELHI)
(Through Video Conference)

BEFORE MS SUCHITRA KAMBLE, JUDICIAL MEMBER
AND

SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER

ITA No:- 5191/Del/2018
(Assessment Year: 2015-16)

M/s Pearey Lal & Sons ACIT,
Rohtak.
(E.P.) Pvt. Ltd., Vs.
RESPONDENT
New Delhi.

PAN No: AAACP7410L

APPELLANT

Assessee By : Shri R.K. Kapoor, CA
Revenue By : Shri Jagdish Singh, Sr. DR

Per Anadee Nath Misshra, AM

(A) This appeal by the Assessee is filed against the impugned order of Learned

Commissioner of Income Tax (Appeals)-, Rohtak, [“Ld. CIT(A)”, for short], dated

21.06.2018 for Assessment Year 2015-16. The Grounds taken in this appeal of

Assessee are as under:

“1. That the learned CIT(A) has erred in law and on the facts and
circumstances of the assessee’s case in upholding a disallowance of
Rs.5,76,522/- on account of delayed deposit of Employees’ Contribution to PF
and ESI.
2. That the Order passed by the learned CIT(A) upholding the action of the
Assessing Officer is bad in law.

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3. That the learned CIT(A) failed to appreciate that the delay in such deposit
was attributable to the technical reasons of delay in clearance of cheque
although such cheques had been issued by the assessee on due dates as per
the respective Acts of ESI and PF.
4. That each ground is independent of and without prejudice to the other
grounds raised herein.”

(B) Both the grounds of appeal pertain to additions totaling Rs. 5,76,522/- made by
the Assessing Officer under section 36(1)(va) of Income Tax Act,1961 (“I.T. Act”, for
short). The disallowances were made by the Assessing Officer holding that the
corresponding deposits in ESI and PF towards Employees’ Contribution amounting to a
total of aforesaid Rs. 5,76,522/- were made after the due date specified in section 36
(1)(va) of IT Act. It was explained by the assessee before the Assessing Officer that
the payments were made by cheque well in time with regard to the due date prescribed
under section 36(1)(va) of IT Act. However, the clearance of the cheques took a few
days. In substance, the Assessee explained to the Assessing Officer that the assessee
had deposited the payments by cheque in time and the delay on account of the
clearance of the cheque should be ignored. The Assessee’s contention before the
Assessing Officer was that the date of deposit of cheque in the bank should be
considered as date of payment for the purpose of section 36(1)(va) of I.T. Act.
However, the Assessing Officer was of the view that the date of clearance of the
cheque should be considered as the date of payment. As the date of clearance was
after the due date prescribed under section 36(1)(va) of I.T. Act, the Assessing Officer
made the aforesaid addition totalling Rs. 5,76,522/-.

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Pearey Lal & Sons Pvt. Ltd.
(C) Aggrieved, the Assessee filed an appeal before the Ld. CIT(A). However, vide
the impugned appellate order dated 21.06.2018, the Ld. CIT(A) confirmed the aforesaid
addition of Rs. 5,76,522/-. Aggrieved again, the Assessee has filed the present appeal
in Income Tax Appellate Tribunal (“ITAT”, for short). In the course of the Appellate
Proceedings in ITAT, the following documents were filed from the assessee’s side:

 Copy of Employee Provident Fund Organisation Challans
 Copy of judgement of Repco Home Finance Ltd. (2014-TIOL-2044-HC-

MAD-IT
 Copy of judgemnt of Ogale Glass Works Ltd. (2002-TIOL-631-SC-IT-LB)
 Copy of judgement of Crescent Roadways Private Limited [TS-510-ITAT-

2021 (HYD)]
 Synopsis dated 27th August, 2021.

(D) At the time of hearing before us, the Ld. Authorized Representative (“Ld. AR”,
for short) for the assessee once again submitted that the cheques were deposited in
bank with the relevant challans well before the due dates prescribed under section
36(1) (va) of I.T. Act, but in some cases the clearance of cheques took 4-8 days, as a
result of which date of clearance of cheques in some instances was after the due
date. The Ld. AR contended that the additions should be deleted as the cheques
were already deposited within due date in the bank alongwith relevant challans. The
Ld. Senior Departmental Representative (“Ld. Sr. DR”, for short) relied on the orders
of the Assessing Officer and the Ld. CIT(A).

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(E) We have heard both sides and perused the materials available on record. The
facts were not in dispute. There is no dispute that the cheques alongwith relevant
challans in respect of the aforesaid amount totalling Rs. 5,76,522/- were already
deposited by the assessee in bank well before the due date prescribed under section
36(1)(va) of I.T. Act. It is also not in dispute that the date of clearance of
corresponding cheque in respect of aforesaid amount of Rs. 5,76,522/- is after the due
date prescribed under section 36(1)(va) of I.T. Act. The issue before us is whether, for
the purpose of section 36(1)(va) of I.T. Act, date of deposit of cheque in the bank is
relevant or the date of clearance of the cheque is relevant. We take guidance from the
order of Hon’ble Madras High Court in the case of Commissioner of Income Tax,
Chennai vs. Repco Home Finance Ltd. as reported in 2014-TIOL-2044-HC-MAD-IT. This
order was passed by Hon’ble Madras High Court in the context of interest under section
234C of I.T. Act. However, the ratio of the order of Hon’ble Madras High Court is
applicable to the issue before us as well. The Hon’ble Madras High Court held in this
case that 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. The Hon’ble High Court further held that once the cheque issued by
the assessee is encashed, the payment relates back to the date of receipt of the

cheque. The following portion of the order of Hon’ble Madras High Court in the case of
Commissioner of Income Tax, Chennai vs. Repco Home Finance Ltd. (supra) is
reproduced below for ease of reference:-

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Pearey Lal & Sons Pvt. Ltd.

“2.1 The brief facts of the case are as under: The respondent/assessee is a
company engaged in the business of home finance. The assessee filed return of
income for the assessment year 2009-2010 admitting Rs.29,44,58,482/- as its total
income. The Assessing Officer completed the assessment under Section 143(3) of
the Income Tax Act and disallowed a sum of Rs.13,85,199/- applying the
provisions of Section 14A of the Act read with Rule 8D of the Income Tax Rules.
The Assessing Officer also charged a sum of Rs.28,80,680/- as interest under
Section 234C of the Act.

2.2 Aggrieved by the said order, the assessee preferred an appeal to the
Commissioner of Income Tax (Appeals), who partly allowed the appeal. With
regard to the plea of the assessee regarding charging of interest under Section
234C of the Act, the Commissioner of Income Tax (Appeals) held that the date of
presentation of cheque should be treated as date of payment of tax and held no
interest under Section 234C of the Act is to be charged. The other plea raised by
the assessee were rejected.

2.3 Assailing the said order, the assessee and the Department preferred appeals
before the Tribunal. The Tribunal confirmed the order passed by the Commissioner
of Income Tax (Appeals) and dismissed the appeals.

2.4 Calling in question the said order passed by the Tribunal, the Revenue has filed
this appeal on the substantial question of law, referred supra.

3. We have heard Mr. T.R. Senthil Kumar, learned Standing Counsel for the
Revenue and perused the orders passed by the Tribunal and the authorities below.

4. The core issue to be considered in this case is whether interest under Section
234C of the Act is to be calculated based on date of clearing of the cheque or date
of presentation of the cheque.

“5. The issue raised in this appeal is no longer res integra in view of the decision
of the Supreme Court in Commissioner of Income Tax v. Ogale Glass Works Ltd.,

[1954] 25 ITR 529 = 2002-TIOL-631-SC-IT-LB, wherein it is held as under:

"11. ….. When it is said that a payment by negotiable instrument is a

conditional payment what is meant is that such payment is subject to a condition

subsequent that if the negotiable instrument is dishonoured on presentation the

creditor may consider it as waste paper and resort to his original demand:

(Stedman v. Gooch, ((1791) 1 Esp 5). It is said in Benjamin on Sale, 8th Edn. p. 788:

'The payment takes effect from the delivery of the bill, but is defeated by the
happening of the condition i.e. nonpayment at maturity.'

In Byles on Bills, 20th Edn., p. 23 the position is summarised pithily as follows:

'A cheque, unless dishonoured, is payment.'

To the same effect are the passages to be found in Hart on Banking, 4th Edn.
Vol. I, p. 342. In Felix Hadley & Co. v. Hadley, (1892) 2 Ch D 680 Byrne, J.
expressed the same idea in the following passage in his judgment at p. 682:

'In this case I think what took place amounted to a conditional payment of the
debt; the condition being that the cheque or bill should be duly met or

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Pearey Lal & Sons Pvt. Ltd.

honoured at the proper date. If that be the true view, then I think the position
is exactly as if an agreement had been expressly made that the bill or cheque
should operate as payment unless defeated by dishonour or by not being met;
and I think that that agreement is implied from giving and taking the cheques
and bills in question.'

The following observations of Lord Maugham in Rhokana Corporation v. Inland
Revenue Commissioners, 1938 AC 380 are also opposite:

'Apart from the express terms of Section 33 sub-section 1, a
similar conclusion might be founded on the well-known
common law rules as to the effect of the sending of a cheque
in payment of a debt, and in the fact that though the payment
is subject to the condition subsequent that the cheque must
be met on presentation, the date of payment, if the cheque is
duly met, is the date when the cheque was posted.'

In the case before us 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, namely, dishonour by non-payment
and that being so there can be no question, therefore, that the assessee did not
receive payment by the receipt of the cheques. The position, therefore, is that
in one view of the matter there was, in the circumstances of this case, 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."

(emphasis supplied)

6. The above said view of the Supreme Court was reiterated by a recent

decision of the Supreme Court in Director of Income Tax v. Raunaq Education

Foundation, (2013) 2 SCC 62 = 2013-TIOL-01-SC-IT.

7. It is not the case of the department that the cheque issued by the assessee
was dishonourned. Once the cheque issued by the assessee is encashed, in the
light of the decisions referred supra, the payment relates back to the date of
receipt of the cheque.”

(E.1) In view of the foregoing, we are of the view that the relevant date to be
considered for the purpose of section 36(1)(va) of I.T. Act is the date of deposit of
cheque in the bank, and not the date of clearance of the cheque. Consequently, we
hold that the aforesaid amount of Rs. 5,76,522/- is allowable under section 36(1)(va) of
I.T. Act. Accordingly, we direct the Assessing Officer to allow the aforesaid amount of

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ITA No.- 5191/Del/2018
Pearey Lal & Sons Pvt. Ltd.
Rs. 5,76,522/-. The grounds of appeal are allowed. In the result, the appeal is
allowed.
Our order was orally pronounced in Open Court on 02-09-2021, after conclusion of the
hearing, in the presence of representatives of both parties. Now this order in writing is
signed today on 07/09/2021.

Sd/- Sd/-
(SUCHITRA KAMBLE) (ANADEE NATH MISSHRA)
JUDICIAL MEMBER ACCOUNTANT MEMBER

Dated: 07/09/2021
Pooja/-

Copy forwarded to:

1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT

ASSISTANT REGISTRAR
ITAT NEW DELHI

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Pearey Lal & Sons Pvt. Ltd.

Date of dictation
Date on which the typed draft is placed before the
dictating Member
Date on which the typed draft is placed before the
Other Member
Date on which the approved draft comes to the Sr.
PS/PS
Date on which the fair order is placed before the
Dictating Member for pronouncement
Date on which the fair order comes back to the Sr.
PS/PS
Date on which the final order is uploaded on the
website of ITAT
Date on which the file goes to the Bench Clerk
Date on which the file goes to the Head Clerk
The date on which the file goes to the Assistant
Registrar for signature on the order
Date of dispatch of the Order

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