The question before us is

"if tax is deposited on or before due date through cheque but en cashed after the due date ,whether it can/will be treated as "default in payment?"

First of all I take clear provisions regarding the above question.

Service Tax

As far as Service tax is concerned the position is very much clear .
As per service tax rules 1994 rule 6 (2A) if the service tax has been deposited through cheque than the date of presentation of cheque to the bank will be deemed date of payment .so for service tax rule is clear.

rule is reproduced hereunder
"(2A) For the purpose of this rule, if the assessee deposits the service tax by cheque, the date of presentation of cheque to the bank designated by the Central Board of Excise and Customs for this purpose shall be deemed to be the date on which service tax has been paid subject to realization of that cheque."

other important points regarding payment of service tax

  1. If last date is a holiday - If last day of payment and filing return is a public holiday, tax can be paid and return can be submitted on next working day - CBE&C circular No. 63/12/2003-ST dated 14-10-2003.
  2. IF payment of service tax made through internet/net banking on or before 8.00pm will be treated on same day and payment made after 8.00 pm will be treated /deemed to be made on next working day.for online payment service tax rules provide one day extra than normal due date.

Each state has a separate Vat Act and Rules so we have check respective act ,I have found a specific clause under bihar vat act and it may possible that other act may also have the similar provisions.

vat rules bihar ,rule 27(2) explanation

Explanation For the purposes of calculating penalty, if any, under the Act and the rules, the date of receipt of cheque or draft, as the case may be, by Bank or the treasury or the Circle concerned, as the case may be, shall ordinarily be deemed to be the date of payment by the dealer, save in the case of a cheque, which is dishonored.

Income Tax

The most important and controversial is Income tax.lets try to clear the dust from the provisions of Income tax Act,rules,circulars,notification and other relevant act.

  • In terms of provisions of Income-Tax Act, 1961 (Act) the payment of taxes i.e. advance Income-Tax, fringe benefit tax, tax deducted/ collected at source are to be made before the specified due dates and even a day's delay in payment attracts penal interest or may lead to dis allowance of expenses in tax assessments/ returns. In cases where taxes are paid through cheque, the date of payment could be the date of tender of cheque to the authorised banker or the date of clearance of cheque from the payer's account.
  • Payments to government accounts were regulated by Central Treasury Rules (Old Rules). As per the said rules when a cheque/draft is honoured the payment shall be deemed to have been made on the date the cheque/draft is handed over to the government's bankers or to a government officer authorised to receive money on behalf of the government;

  • Central Board of Direct Taxes (CBDT) vide its Circular No. 261 of August 8, 1979.This circular is important so reproduced at the end of the post.This Circular was in confirmation to Central Treasury rules clause shown above and according to the the cheque tender date to banker will be deemed date of payment subject to realisation of cheque.

  • Thereafter,Central Government Account (Receipts and Payments) Rules 1983 (1983 Rules) were framed. These rules provide that 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;
  • The question now arises whether the issue to be resolved by Central Government Account (Receipts and Payments) Rules 1983 or by the CBDT circular 261 august 8,1979?.the same question was decided in the case of PL Haulwel Trailers Ltd reported in 100 ITD 485 before tribunal and it is held that the position that in case of payment of tax by cheque, the date of presentation should be taken as 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

  1. 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 .
  2. 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;

I have try to find out the latest position regarding above point ,but if you have different opinion then me or you want to add more points to it then please add in the comment sections.


please comment

Circular 261 ,8 August ,1979

939. Recording date of tender of cheque and date of its realisation on challans for payment of direct taxes is to be done by branch of authorised public sector bank where it is tendered for payment
Clarification 1
1. In terms of rule 80 of the Compilation of the Treasury Rules, if a cheque or draft tendered in payment of Government dues and accepted under the provisions of rule 79 is honoured on presentation, the payment is deemed to have been made on the date on which it was handed over to the Government bankers. The need to indicate on the challan the date of tender of the cheque/draft with the authorised public sector bank, was duly taken notice of by the Central Board of Direct Taxes and at the request of the Board, the Reserve Bank issued instructions to all the authorised public sector banks in November 1977 stipulating that the receiving branch should brand either an inward stamp of receipt as soon as the challan is tendered over the counter, or a date stamped with provision for two dates, i.e., the date of tender and the date of the realisation of the cheque. The specimen of the date stamp is as under:
Date of tender..............................
Received payment Rs. ...........................
Date of realisation..........................
Authorised Signatory
2. Apart from the above procedure, the Central Board of Direct Taxes has revised the proformae of the various challans and new challan forms with colour bands are being progressively used to replace the existing ones. The new challans for the payment of self-assessment tax have already been introduced from April 1, 1979 and it will be noticed therefrom that the counterfoils of the challans meant both for the Income-tax Officer and the taxpayer contain separate columns for recording the date of tender of the cheque and date of its realisation. The other challan forms which are being introduced shortly, also contain similar columns.
3. In view of the foregoing, it is hoped that there will be no difficulty in recording, on the challan, the date of tender of the cheque/draft by the branch of the authorised public sector bank where it is tendered for payment of any of the direct taxes.
Circular: No. 261 [F. No. 385/61/79-IT(B)], dated 8-8-1979.
Clarification 2
1. In Boards Circular No. 261 dated 8-8-1979 [Clarification 1] it was stated that the Reserve Bank of India has requested the authorised public sector banks to brand the challan with the inward receipt stamp which should, inter alia, contain the date of tender of the cheque/draft and the date of its realisation. It was also stated therein that the Board was progressively introducing new-colour-band challans which would contain separate columns for recording the dates of tender of the cheque/draft and of its realisation.
2. A question has been raised as to whether the filling up of the dates of tender of the cheque/draft and its realisation in the revised colour-band-challan would be necessary if in the inward receipt stamp fixed by the receiving bank branch this information is filled in.
3. The objective here obviously is to record evidence on the counterfoils of challan about the dates of tender of the cheque/draft and its realisation. If this evidence is recorded in the inward receipt stamp of the bank, there would obviously be no objection if such dates in the challan forms are not filled. In such cases, the filling up of the relevant columns of the challan should not be insisted upon.
Circular : No. 265 [F. No. 385/61/79-IT(B)], dated 11-4-1980.





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