2022 (10) TMI 1214 - AT - Income Tax

Levy of fees u/s 234E - late filing of quarterly TDS returns for Quarter-2 to Quarter-4 - intimation u/s 200A - levy of fees u/s 234E for any period prior to 01/06/2015 - HELD THAT - We find that a view favorable to the assessee has been taken by Hon ble High Court of Kerala in recent decision titled as United Metals 2021 (12) TMI 1349 - KERALA HIGH COURT following its earlier decision in Sarala Memorial Hospital V/s UOI 2018 (12) TMI 1818 - KERALA HIGH COURT which is stated to have attained finality. Similar view favorable to assessee has been taken by Chennai Tribunal in its recent decision titled as M/s DRG Rexine Inc. V/s ACIT 2022 (2) TMI 1404 - ITAT CHENNAI following the case law of Fatehraj Singhvi V/s UOI 2016 (9) TMI 964 - KARNATAKA HIGH COURT Admittedly there is no decision by Hon ble High Court of Madras. In such a case an analogy could be drawn from the decision of Hon ble Supreme Court in CIT V/s Vegetable products Ltd. 1973 (1) TMI 1 - SUPREME COURT for the conclusion that in case of two reasonable constructions of taxing statutes the one that favors the assessee must be adopted. Respectfully following the same we would hold that a view favorable to the assessee was to be adopted and therefore the levy of fees u/s 234E for any period prior to 01/06/2015 would not be sustainable in the eyes of law. We order so. In the result the fees levied by TDS officer u/s 234E for Financial Years 2013-14 2014-15 could not be sustained. Thus we direct CPC / Ld. AO to delete the impugned fees levied u/s 234E for various quarters and re-compute the outstanding demand against the assessee. Decided in favour of assessee.

Summary

Issues Involved:
1. Levy of fees under Section 234E for late filing of quarterly TDS returns.
2. Applicability of Section 200A for computation of fees under Section 234E prior to 01/06/2015.

Issue-wise Detailed Analysis:

1. Levy of fees under Section 234E for late filing of quarterly TDS returns:
The sole grievance of the assessee was the levy of fees under Section 234E for the late filing of quarterly TDS returns for the quarters of the financial year 2014-15. The Centralized Processing Center (CPC) levied these fees, and the Commissioner of Income Tax (Appeals) [CIT(A)] confirmed the same, stating that the intimation was issued after 01/06/2015, thus empowering CPC to make such adjustments. The assessee appealed against this decision.

2. Applicability of Section 200A for computation of fees under Section 234E prior to 01/06/2015:
The Tribunal noted that Section 234E, inserted by the Finance Act 2012 effective from 01/07/2012, envisages a fee of Rs. 200 per day for default in delivering the TDS statement within the prescribed time. Section 200A, which deals with processing TDS statements, was amended by the Finance Act 2015 effective from 01/06/2015 to include the computation of fees under Section 234E.

The assessee argued that since the amendment to Section 200A was effective only from 01/06/2015, no fees under Section 234E should be payable for any period before this date. This argument was supported by the Karnataka High Court in the case of Fatehraj Singhvi vs. Union of India, which held that the amendment to Section 200A was prospective and not retrospective.

Conversely, the Gujarat High Court in Rajesh Kourani vs. Union of India held that Section 234E is a charging section generating liability to pay fees, and the amendment to Section 200A was merely a regulatory mechanism. Therefore, fees under Section 234E could be levied for periods before 01/06/2015.

The Tribunal observed that the Kerala High Court and the Chennai Tribunal had taken a view favorable to the assessee, holding that the levy of fees under Section 234E for periods prior to 01/06/2015 was not sustainable. The Tribunal followed the principle established by the Supreme Court in CIT vs. Vegetable Products Ltd., which states that in case of two reasonable constructions of a taxing statute, the one that favors the assessee should be adopted.

Conclusion:
The Tribunal concluded that the levy of fees under Section 234E for any period before 01/06/2015 was not sustainable. Consequently, the fees levied by the TDS officer for the financial years 2013-14 and 2014-15 were deleted, and the appeals of the assessee were allowed. The CPC and the Assessing Officer were directed to delete the impugned fees and re-compute the outstanding demand against the assessee. The appeal was thus allowed in favor of the assessee.

Order Pronounced:
The order was pronounced on 26th October 2022, allowing the appeal and directing the deletion of fees levied under Section 234E for the relevant quarters.