Circular No. 306

What this is

Circular No. 306 was issued by the Central Board of Direct Taxes on 19 June 1981. Its subject is Section 191 l Direct Payment.

This is a clarification. The Board is stating how it reads a provision. That reading binds the department; it does not bind a court, and where the section says otherwise the section wins.

What it does

Asks taxpayers to pay direct taxes at the place where they are assessed, so that the departmental copy of the challan reaches the Income-tax Officer quickly and credit is given without delay. Tax deducted at source is an exception: it is to be paid at the place of the income-tax office where the deductor files his annual or periodical statements of deduction under the Income-tax Rules. The circular describes where payment may be made: in Delhi, Greater Bombay, Madras, Calcutta, Hyderabad, Bangalore, Ahmedabad and Kanpur, offices of the Reserve Bank, all branches of the State Bank of India and all branches of two or three other selected public sector banks in existence on 1-4-1976 take cash, cheques and drafts, and in other important centres branches of the State Bank of India and two other selected public sector banks do so. Taxpayers with an account at an authorised bank are advised to tender cheques at their own branch, which gets them the receipted challan without delay, avoids clearing house operations and lets any misclassification be corrected at once. A second clarification adds that a taxpayer without such an account may consider opening one so that tax payments and refunds can be routed through it.

Why it was issued

Instances of delay in giving taxpayers credit for tax paid had been brought to the Board's notice, the delay arising because the departmental copy of the receipted challan took time to reach the assessing officer when payment was made elsewhere.

Who it reaches

• Taxpayers paying advance tax and self-assessment tax
• Deductors paying over tax deducted at source
• Taxpayers assessed in one city but banking in another
• Banks authorised to collect direct taxes

The provisions it speaks to

The instrument, as the Board published it

SECTION 191 l DIRECT PAYMENT
938. Payment of direct taxes, other than tax deducted at source, to be made at the place where taxpayer is assessed to tax
CLARIFICATION 1
1. Instances of delay in giving credit to the taxpayers for the payment of direct taxes have been brought to the notice of the Board where such payments are made at a place other than the place of assessment of the taxpayer. The delay is generally due to the time taken in the departmental copy of the receipted challan reaching the Income-tax Officer concerned.
2. In order to avoid such delays it is suggested that, as far as possible, payment of direct taxes, other than of tax deducted at source, should be made at the place where the taxpayer is as­sessed to tax. The departmental copy of the challan will then reach the Income-tax Officer concerned quickly and the Department will be able to give credit to the taxpayer for his tax payment expeditiously.
3. As regards the tax deducted at source the payment should be made at the place of the income-tax office where the person responsible for deduction and payment of tax is required to file the annual/periodical statements of tax deducted at source as prescribed under the Income-tax Rules.
4. As mentioned in paragraph 2 above, payment of direct taxes other than of tax deducted at source should be made at the place where the taxpayer is assessed to tax. The volume of payments on account of direct taxes is very much larger in the metropolitan cities, viz., Delhi, Greater Bombay, Madras, Calcutta, Hyderabad, Bangalore, Ahmedabad and Kanpur. In these cities, therefore, offices of the Reserve Bank, all branches of State Bank of India and all branches of 2 to 3 other selected public sector banks which were in existence on 1-4-1976, provide the facilities for acceptance of payments of direct taxes either in the form of cash or by cheques/drafts. A list showing the names of banks and the number of branches which have been authorised for the purpose in these cities is enclosed for information of your members. Likewise, in other important and bigger centres, in addition to branches of the State Bank of India, branches of two other se­lected public sector banks accept payments of direct taxes and the income-tax offices do guide the assessees in this regard.
5. An important point which the Board would like to stress is that while payment by a local cheque or draft can be made at any of the branches of banks authorised for the purpose, the asses­sees are advised that if they have an account in any branch of an authorised bank they should tender cheques at the said branch of the authorised bank. This arrangement will enable them to get the receipted copies of challans without any delay and will also save manpower, etc., by eliminating the Clearing House Operations in respect of such cheques. Another advantage of this procedure will be that if any payment made by the taxpayer is misclassified, the mistake can be immediately corrected.
Circular: No. 306 [F. No. 385/7/81-IT(B)], dated 19-6-1981.
ANNEX-STATEMENT SHOWING THE DETAILS OF AUTHORISED PUBLIC SECTOR BANKS AT METROPOLITAN CITIES WHERE THE RESERVE BANK OF INDIA (RBI) IS THE FOCAL POINT BANK

Focal point bank

Nominated public sector banks

No. of all authorized branches on 1-4-1976

1

2

3

1. RBI New Delhi

1. State Bank of India

108

2. Punjab National Bank

78

3. Bank of India

34

4. Syndicate Bank

41

261

2. RBI Bombay

1. State Bank of India

67

2. Bank of Baroda

60

3. Bank of India

67

4. Central Bank of India

57

251

3. RBI Madras

1. State Bank of India

47

2. Indian Bank

64

3. Indian Overseas Bank

43

154

4. RBI Calcutta

1. State Bank of India

105

2. United Bank of India

124

3. United Commercial Bank of India

49

4. Punjab National Bank

28

306

5. RBI Hyderabad

1. State Bank of India

31

2. Syndicate Bank

26

3. State Bank of Hyderabad

48

105

6. RBI Bangalore

1. State Bank of India

26

2. Canara Bank

61

3. Syndicate Bank

43

4. State Bank of Mysore

49

179

7. RBI Ahmedabad

1. State Bank of India

54

2. Bank of India

29

3. Bank of Baroda

37

120

8. RBI Kanpur

1. State Bank of India

52

2. Bank of India

4

3. Punjab National Bank

17

73

CLARIFICATION 2
1. In para 5 of Board’s Circular No. 306, dated 19-6-1981 the assessees were advised that if they had account in any branch of the authorised bank, they should tender cheques at the said branch of the authorised bank. This arrangement was suggested in the interest of taxpayers themselves. Further, they are advised that in case they do not have any account in any branch of the authorised bank at the place where they are being assessed, they might consider opening an account in any branch of the said banks so that the payment of taxes and encashment of refund of taxes, etc., can be routed through that account. The advantage of this procedure would be that they would get expeditious credit for tax payments made in the books of the Income-tax Department and the possibility of any payment or challan being lost in transit would be eliminated.
2. The procedure suggested above should not be construed as an imposition on the taxpayers and it is reiterated that they are free not to use the procedure suggested if they so desire. Howev­er, the adoption of the procedure would be in their own interest.
Letter: F.No. 385/37/-81-IT(B), dated 3-10-1981.

What to watch

• The place of payment for tax deducted at source is not the place of assessment of the deductor's own income; it is the office where the deduction statements are filed.
• The advice to tender cheques at one's own branch of the authorised bank is the practical point; it is what gets the receipted challan back at once.
• The list of banks and branch numbers is as at 1-4-1976 and is of historical interest only.
• Payment of direct taxes now runs through electronic channels in terms this text does not carry.
• The supplied text is clipped in the middle of the second clarification.

Where you meet it

In an old dispute over credit for a tax payment that does not appear against the assessee's record.

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