CLR Editorial Note: In the Financial year end of 2002, the assessee, a charitable trust eligible for exemption Under/Section 11, received a post-dated cheque dated from Apollo Tyres Ltd for which it issued a receipt. The Assessing Officer held that the post-dated cheque had been accepted by the assessee to do undue favour to Apollo Tyres, whose directors were trustees of the assessee and that there was a violation of section 13(2)(d)(h), and that section 11 exemption had to be denied.
On appeal to the Tribunal and subsequently the High Court, this order was reversed on the ground that the post dated cheque was given before FY end 2002 and was duly honoured in April, 2002 when it was presented before the bank. In this transaction, the date of payment of the cheque should be treated as the date on which the cheque was received by the assessee. The department appealed to the Supreme Court which dismissed their appeal and held:
“Though the assessee trust issued a receipt in March 2002 when it received the cheque dated 22.4.2002, it was clearly stated in its record that the amount of donation was receivable in future and it was shown as donation receivable in the balance sheet as on 31.3.2002. Also Apollo Tyres Ltd did not avail any advantage of the said donation during the FY 2001-2002. When a post-dated cheque is issued, it will have to be presumed that the amount was paid on the date on which the cheque was given to the assessee and, therefore, it cannot be said that any undue favour was done by the assessee to Apollo Tyres Ltd. A cheque, unless dishonoured, is payment (Ogale Glass Works 25 ITR 529 (SC) followed)”
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