Circular No. 261

What this is

Circular No. 261 was issued by the Central Board of Direct Taxes on 8 August 1979. Its subject is 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.

What it does

Settles who records the two dates on a direct tax challan paid by cheque. Under rule 80 of the Compilation of the Treasury Rules, a cheque or draft accepted under rule 79 and honoured on presentation is treated as paid on the day it was handed over to the Government bankers, so the date of tender has to appear on the challan. At the Board's request the Reserve Bank instructed all authorised public sector banks in November 1977 that the receiving branch must stamp the challan when it is tendered over the counter, either with an inward receipt stamp or with a date stamp carrying both the date of tender and the date of realisation, the specimen being reproduced. The Board adds that it has revised the challan proformae, with colour bands, the new self-assessment tax challan already in use from 1st April 1979, and that the counterfoils meant for the Income-tax Officer and for the taxpayer carry separate columns for the two dates, other new challan forms to follow shortly.

Why it was issued

The Board took notice of the need to show the date of tender on the challan, since under the treasury rules that date, not the date of realisation, fixes when payment was made.

Who it reaches

• Taxpayers paying direct taxes by cheque or draft
• Branches of authorised public sector banks receiving challans
• Income-tax Officers computing interest for late payment
• Assessees disputing the date of payment on a challan

The instrument, as the Board published it

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

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. ...........................
Rupees.......................................
Date of realisation..........................
For.................................Bank
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.

What to watch

• The date of tender governs only where the cheque is honoured on presentation; a dishonoured cheque does not get that benefit.
• The stamping duty is on the receiving branch, so a challan returned without the tender date needs to be taken back to the bank, not to the Department.
• The challan forms, the treasury rules procedure and the manual stamping described here belong to the pre-electronic payment era.
• The circular records only what the Reserve Bank instructed in November 1977; it does not itself bind the banks.

Where you meet it

In a dispute over interest for late payment of advance tax or self-assessment tax where the cheque was tendered in time but realised later, and when a challan is produced without a tender date.

What it names

Rules it names. Rule 79, 80 of the Income-tax Rules, 1962. The 1962 Rules were replaced by the Income-tax Rules, 2026, which renumbered nearly everything: a rule number quoted here almost never means the same rule today.

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