Negotiable instruments Act
Querist :
Anonymous
(Querist) 08 October 2010
This query is : Resolved
Whether Income Tax refund order is a Cheque
Parthasarathi Loganathan
(Expert) 08 October 2010
Income Tax Refund Order is not a cheque as it is neither negotiable nor transferable
s.subramanian
(Expert) 08 October 2010
Yes. I agree.It is merely an order entitling you to refund.
Querist :
Anonymous
(Querist) 08 October 2010
But a crossed or Account payee cheque also can not be tranferred nor it remains negotiable. still it remains cheque
R.Ramachandran
(Expert) 08 October 2010
I think too many things are getting mixed up here.
First there will be an Income Tax Refund Order passed by the Assessing Officer. This is certainly not a cheque.
But, based on such a refund order, a cheque will be issued. There is a validity period attached to it. It is definitely a cheque and a negotiable instrument.
Querist :
Anonymous
(Querist) 09 October 2010
I am aware that refund order has to be passed first. But the so called cheque is styled by the Income Tax dept as a refund order. Words Refund Order are printed on that instrument. It is not in the Cheque format. Hence, question arises whether it is a cheque. Whether a cheque issued towards refund of tax is negotiable?
R.Ramachandran
(Expert) 09 October 2010
It is definitely a cheque, it is a crossed cheque. But it is not negotiable and not transferable.
This is covered under Section 123 of the N.I. Act.
The mere crossing of a cheque does not affect its negotiability in any manner. However, where the words 'not negotiable' are added to the crossing, the cheque is not negotiable, though transferable.
In the case of income tax refund orders, even it has been made non-transferable.
Though it is a cheque, such crossings are intended to protect the drawer andeven the payee against theft or loss of the cheque so crossed.
The crossing expresses an intention that the cheque should only be collected for the account of the payee. Such a crossing is not yet recognized by statute in India, but by course of banking operations. Courts have held that such a crossing is a direction to the collecting bank to apply the proceeds to the payee's account only. (Underwood v. Bank of Liverpool (1924) 1 KB 775; Tailors Priya v. Gulabchand AIR 1963 Cal 36).
Just because a cheque has been made "not negotiable" would not rob the character of the instrument from being "a cheque".
M/s. Y-not legal services
(Expert) 09 October 2010
