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TMI Blog2019 (1) TMI 604X X X X Extracts X X X X X X X X Extracts X X X X ..... y, by way of fee, a sum of two hundred rupees for every day during which the failure continues. (2) The amount of fee referred to in sub-section (1) shall not exceed the amount of tax deductible or collectible, as the case may be. (3) The amount of fee referred to in sub-section (1) shall be paid before delivering or causing to be delivered a statement in accordance with sub-section (3) of section 200 or the proviso to sub-section (3) of section 206C. (4) The provisions of this section shall apply to a statement referred to in sub-section (3) of Section 200 or the proviso to sub-section (3) of section 206C which is to be delivered or caused to be delivered for tax deducted at source or tax collected at source, as the case may be, on or after the 1st day of July, 2012". (Emphasis Supplied) 3. Section 234E of the Act imposes a per diem 'fee' upon a person for failure to deliver to the prescribed Income Tax Authority or to a person authorized by such authority, a statement relating to deduction of tax at source, after paying the tax so deducted to the credit of the Central Government, within the time prescribed under Section 200(3) or under the proviso to Section 206C(3) of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax', since it does not partake of the character of a general financial imposition on all subjects. 7. The petitioner points-out that, for instance, under Section 221 of the Act penalty for default in payment of tax is imposed only after giving the assessee a reasonable opportunity of being heard; and if the assessee proves to the satisfaction of the Assessing Officer that the default was for good and for sufficient reason, no penalty is imposed. 8. In support of his contention, the petitioner cites the judgment rendered by the Supreme Court in Dewan Chand Builders vs. Union of India and Ors. reported as (2012) 1 SCC 101, in which, relying upon its earlier judgment in State of West Bengal vs. Kesoram Industries Ltd.and Ors. (2004) 10 SCC 201 the Supreme Court has explained the distinction between the terms 'tax' and 'fee' in the following words : "29. ..."146. ... The terms cess is commonly employed to connote a tax with a purpose or a tax allocated to a particular thing. However, it also means an assessment or levy. Depending on the context and purpose of levy, cess may not be a tax; it may be a fee or fee as well (sic). It is not necessary that the services rendered from out of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 of the Constitution, ordinarily there are two classes of cases where Government imposes 'fees' upon persons. In the first class of cases, the Government simply grants a permission or privilege to a person to do something, which otherwise that person would not be competent to do and extracts fees either heavy or moderate from that person in return for the privilege that is conferred. X XXXX "49. In the other class of cases, the Government does some positive work for the benefit of persons and the money is taken as the return for the work done or services rendered. If the money thus paid is set apart and appropriated specifically for the performance of such work and is not merged in the public revenues for the benefit of the general public, it could be counted as fees and not a tax. There is really no generic difference between the tax and fees and as said by Seligman, the taxing power of a State may manifest itself in three different forms known respectively as special assessments, fees and taxes." (paras 48, 49 of the report, Emphasis Supplied) 12. While some subsequent judgements of the Supreme Court have pointed-out that certain observations contained in the Shirur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld depend on the fact situation in which such levy is made. Under Section 234E a fee is imposed for delay in furnishing a TDS return in lieu of the benefit or accommodation afforded by the Government to a person who has deducted tax on account of another person but has failed to furnish the tax deducted statement within the time stipulated in the law. The benefit and facility of accepting such tax deducted statement at a belated stage is contingent upon the payer remitting a per diem amount so as to avail the facility of the Government accepting his TDS statement beyond the stipulated period. This, in our opinion, amounts to a benefit, service or facility afforded by the Government to the payer. 15. Our view in this matter is fortified by what a coordinate bench of the Bombay High Court has held in the case of Rashmikant Kundalia vs. Union of India reported as (2015) SCC OnLine Bom 336 where the Court holds that under the Act, there is an obligation on the part of the Income Tax Act to process Income Tax Returns within a specified period from the date of filing, which the Department cannot do until information of the tax deducted at source is furnished by the deductor within the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... introduced by the Act I of 2008 cannot be a characterized as Tax as choice is left with the dealer concerned to be attractable by the levy. Needless to mention a fee is payment levied by the state in respect of services performed by it for the benefit of the individuals." (Emphasis Supplied) 17. The Calcutta High Court has therefore viewed the matter from the additional perspective of whether or not there was compulsion upon the payer in relation to the levy imposed, holding that the essential characteristic of 'tax' is compulsion to pay, whereas in the case of 'fee' the element of compulsion or legal obligation is absent. The Calcutta High Court has further held that the irregular filing of a return is regularised upon payment of a late fee, thereby also obviating penal consequences, which is the special service availed by the payer as a quid pro quo for the payment of late fee. 18. For completeness we may also notice that the constitutional vires of Section 234E of the Act has been upheld by the High Courts of Rajasthan, Karnataka and Kerala. 19. A Division Bench of the Rajasthan High Court has upheld the constitutional validity of Section 234E of the Act in M/s. Dunlod Shiks ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne Ker 30216 has dismissed a petition challenging the vires of Section 234E of the Act. The Kerala High Court has inter alia proceeded on the rationale that the Income Tax Department has to render extra service due to late filing of a TDS return/statement, in lieu of which the fee under Section 234E is imposed. 22. As evident from the above discussion, the issue raised by the petitioner is long-settled by a consistent line of judicial precedent from several High Courts as well as from the Supreme Court. 23. In fact in its decision rendered in Sona Chandi Oal Committee &Ors. vs. State of Maharashtra (2005) 2 SCC 345, the Supreme Court has held that it is not even necessary to establish that those who pay the fee must receive a direct or special benefit or advantage of services rendered for which the fee is paid; nor does the levy cease to be a fee merely because there is an element of compulsion or excessiveness in it in the following words: "22. A three Judge Bench of this Court in BSE Brokers' Forum v. Securities and Exchange Board of India after considering a large number of authorities, has held that much ice has melted in the Himalays after the rendering of the earlier judgm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cordingly, there is unanimity in the view taken on the matter of constitutionality of Section 234E of the Act across several jurisdictions. 26. While addressing the operation and effect of Section 234E of the Act, it is also necessary to refer to the provisions of Section 271H of the Act which, as extracted below waives the imposition of penalty for delayed filing of TDS return/statement, if a person proves that he has paid the tax deducted and has filed the TDS statement alongwith the fee and interest, before expiry of a period of one year from the time prescribed. Section 271H reads as under: "Section 271H: Penalty for failure to furnish statements, etc. (1) Without prejudice to the provisions of the Act, the Assessing Officer may direct that a person shall pay by way of penalty, if, he- (a) fails to deliver or cause to be delivered a statement within the time prescribed in sub-section (3) of Section 200 or the proviso to sub-section (3) of Section 206C; or (b) furnishes incorrect information in the statement which is required to be delivered or caused to be delivered under sub-section (3) Section 200 or the proviso to sub-section (3) of Section 206C. (2) The penalty referr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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