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TMI Blog2020 (3) TMI 608X X X X Extracts X X X X X X X X Extracts X X X X ..... evied as a part of common burden while fee is payment for a special benefit of privilege. Fee confers some advantage and is a return of consideration for services rendered. Revenue is right in contending that Section 234 (E) of the Act is not a penalty. Penalty is levied under Section 271 (H) and is not automatic. Penalty is levied only when tax is deducted at source along with interest fee is not deposited and statement is not filed within one year. If the above two conditions are satisfied, then penalty is not leviable. On the other hand, Section 234 (E) of the Act is only a late fee at the rate of 200/- per day. As held in the judgments relied above, Section 234 (E) of the Act is purely compensatory and is a special benefit to the advantage of the assessee as well for belatedly filing the TDS statement. The revenue is right in contending that Section 234 (E) of the Act is meant to ensure that assessee files the statement in time, so that the Department can clear the returns of the persons connected with the assessee, i.e., from whom tax has been deducted at source without any delay and accurately with increasing or overloading the burden of the department. A provision can be hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection (3) of Section 206 C 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. 4. The petitioner contends that Section 234 E of the Income Tax Act is penalty in the shape of a fee. It is submitted that prior to the introduction of Section 234 E, penalty for non-filing of the TDS statements was ₹ 100/- per day as provided for under Section 272 A (2) (K) of the Act. It is submitted that Section 234 E deals with the fee payable for default in filing TDS statement on 1/7/2012. According to the petitioner, the prescribed form for filing TDS statement did not have a provision for payment of fine for default and the fee under Section 234 E of the Act can be collected only from 1/6/2015. It is submitted that Section 200 A of the Act was amended by insertion of Clause (c) to enable collection of fee under Section 234 in the form prescribed under Section 200 (3) and processed under Section 200 (A) of the Act. 5. The petitioners have given a tabular chart to demonstrate as to how Section 234 E is a penalty disguised as a fee. Sl. Section Relating to Inserted w.e.f. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y provision (Section 272 A (2) (k) and its proviso. (b). Section 234 E has the very same characteristics seen only in other penalty provisions under the same Act (Income Tax Act, 1961) like Section 271 FA, 271 FB, 271 GB and Section 272 A (2); (c). Section 234 E has been purportedly inserted under Finance Bill, 2012 for "Deterrence" which is not a purpose recognised by either the Constitution or the law laid down by the Hon'ble Supreme Court; (d). Section 234 E is being described as a Fee for Default in filing TDS statement" as seen in Section Heading which is in direct conflict with the laws of criminal jurisprudence; (e). The fee that is sought to be collected under Section 234 E is not connected to any service rendered or benefit/licence/privilege conferred; and (f). The fee levied under Section 234 E is not justifiable in the context of no increasing/additional service being rendered to demand an incrementally increasing fee for every additional day of continuing to be in default. 9. Petitioner relies on a judgment of the Hon'ble Supreme Court, in OM PRAKASH AGARWAL AND OTHERS Vs. GIRI RAJ KISHORI AND OTHERS {1986 (1) SCC -722}, wherein, the Hon'ble Supre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatement without any penalty even when there could be difficulty caused to IT/Revenue) and thus there is no privilege conferred on the petitioner/deductee for which the fee under Section 234 E is purportedly collected. 12. It is further submitted that with an existing penalty for delay in filing TDS statement u/s 271H, Section 234 E being a mere verbatim transformation of an earlier existing penalty u/s 271 A(2)(k) now under a different nomenclature of Fee and thus a penalty disguised as a Fee making it in effect a double penalty (in addition to Sec.271H) for the same default, in violation of Article 20(2) of the Constitution. 13. It is submitted that the levy u/s 234 E as an incrementally increasing Fee is not proportionate to the extent of the privilege conferred on the deductor (by payment of this Fee) for the delayed filing of TDS statement when the Deductor does not even have to pay a penalty until one year of delay in filing TDS statement (u/s 271H) and can file it before or after one year along with interest payable (u/s 220(2)) and as such no privilege in bestowed on the Deductor for filing delayed TDS statement with the Fee u/s 234 E and thus there is no rational nexus. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s filed. 17. It is further submitted that under the Income Tax Act, there is an obligation on the Income-Tax Department to process an income- tax return within specified period from the date of the filing. The department can process the income tax return of a person on whose behalf tax has been deducted only when the information relating to the details of tax deducted is furnished by the deductor in a TDS statement within the prescribed time. The timely processing of returns is the bedrock of an efficient tax administration system. The Courts through various judgments have also called upon the department to look into the aspect of timely processing of returns and issue refunds. 18. It is further submitted that the timely submission of TDS statement containing the details of person on whose behalf tax is deducted becomes very crucial. Unless and until the department receives the details of tax deduction through the TDS statement, timely processing of income tax returns having claim of TDS is not possible. In case, the department goes ahead and processes the income tax return of the assessee having claim of TDS without giving credit for TDS due to non-filing of TDS details by the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egislature has power to levy fee for services provided and to levy penalty is a deterrent. The prompt submission of statements makes it easier for the tax authorities to correlate the returns of other persons, on whose behalf tax has been deducted at source. 22. It is submitted that unless and until the Department receives the details of tax deduction through TDS statements, timely processing of Income Tax returns, having claim of TDS, is not possible. The authorities are facing difficulties when they process IT returns of the assessees having claim of TDS without giving credit for TDS because delay in filing statement. This resulted in refunds becoming due and payment of interest. 23. A Hon'ble Division Bench of High Court of Bombay, in RASHMIKANT KUNDALIA Vs. UNION OF INDIA {(2015) 54 TAXMANN.COM 200 (Bombay) while dealing with the issue as to whether the fee levied under Section 234 (E) of the Act, is in fact tax or not, observed as under:- "12. On a perusal of sub-section (1) of section 234E, it is clear that a fee is sought to be levied inter alia on a person who fails to deliver or cause to be delivered the TDS return/statements within the prescribed time in sub-sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... early of the view that section 234E of the Act is not punitive in nature but a fee which is a fixed charge for the extra service which the Department has to provide due to the late filing of the TDS statements. 15. As stated earlier, due to late submission of TDS statements means the Department is burdened with extra work which is otherwise not VRD 11 of 19 WP771/14 required if the TDS statements were furnished within the prescribed time. This fee is for the payment of the additional burden forced upon the Department. A person deducting the tax (the deductor), is allowed to file his TDS statement beyond the prescribed time provided he pays the fee as prescribed unde section 234E of the Act. In other words, the late filing of the TDS return/statements is regularised upon payment of the fee as set out in section 234E. This is nothing but a privilege and a special service to the deductor allowing him to file the TDS return/statements beyond the time prescribed by the Act and/or the Rules. We therefore cannot agree with the argument of the Petitioners that the fee that is sought to be collected under section 234E of the Act is really nothing but a collection in the guise of a tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xtiles Committee [1989 Supp (1) SCC 168 : 1989 SCC (Tax) 219] , Commr. & Secy. to Govt., Commercial Taxes & Religious Endowments Deptt. v. Sree Murugan Financing Corpn. [(1992) 3 SCC 488] , Secy. to Govt. of Madras v. P.R.Sriramulu [(1996) 1 SCC 345] , Vam Organic Chemicals Ltd. v. State of 3 (2005) 2 SCC 345 VRD 13 of 19 WP771/14 U.P. [(1997) 2 SCC 715], Research Foundation for Science, Technology & Ecology v. Ministry of Agriculture [(1999) 1 SCC 655] andSecunderabad Hyderabad Hotel Owners' Assn. v. Hyderabad Municipal Corpn.[(1999) 2 SCC 274] it was held that the traditional concept of quid pro quo in a fee has undergone considerable transformation. So far as the regulatory fee is concerned, the service to be rendered is not a condition precedent and the same does not lose the character of a fee provided the fee so charged is not excessive. It was not necessary that service to be rendered by the collecting authority should be confined to the contributories alone. The levy does not cease to be a fee merely because there is an element of compulsion or coerciveness present in it, nor is it a postulate of a fee that it must have a direct relation to the actual service rendered b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso well settled that there need not be a mathematical precision between the fee levied and the service rendered. A similar issue arose in Delhi High Court. A Division Bench of Delhi High Court in BISWAJIT DAS Vs. Union of India {(2019) 103 TAXMANN.COM 290 (DELHI), while dealing with the constitutionality of the said Section, upheld Section 238 (E) of the Act. Relevant paragraphs are extracted hereunder:- "27. Upon a conspectus of the above, it is clear that the fee imposed under Section 234E is levied towards regularisation of the delay in filing of a TDS return or statement, since the Income Tax Department has to expend extra effort and resources for processing delayed TDS returns or statements; and possibly also incurs the additional burden of interest to be paid to the assessee on whose account tax deduction has been made. 28. We further hold that describing the levy under Section 234E as a 'fee' does not invalidate the imposition made. We may also point-out the overarching principle that the manner of description of a levy, in this case, calling the levy made under Section 234E of the Act a 'fee', cannot be the sole basis of judging the true nature or validity of the levy. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3) or under proviso to Section 206C or for furnishing incorrect information. As per sub- Section (2), penalty will be not less than ₹ 10,000/- and it may extend upto ₹ 1,00,000/-. Section 273B indicates that no penalty shall be imposable on the person or the assessee for any failure referred to in the said provision if he proves that there was reasonable cause for such failure. Section 273B has also been amended by adding Section 271H and as already noticed under Section 271H(2)(k) penalty can be imposed for failure to furnish statement within prescribed time. However, by incorporating Section 271H in Section 273B, it would indicate that penalty need not be imposed under Section 271H if reasonable cause is shown. The contention of the assessee is that there is no similar provision in the impugned provision namely Section 234E and as such it takes away the valuable right of the assessee. The said contention does not hold water inasmuch as Section 119(2)(a) enables the Board to issue general or special orders in respect of any class of incomes or class of cases from time to time, which includes sub-Section (1A) of Section 201 and as such no hardship would be caused to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncial burden to the Government namely on account of late payment of refund interest is to be paid on such refunds and it would also result in cash flow crunch, especially for business entities. 27. Similarly, High Court of Kerala in GURU SMARAKA SANGAM UPPER PRIMARY SCHOOL Vs. Union of India {(2017) 77 TAXMANN.COM 244 (Kerala) has upheld the constitutional validity of Section 200 of the Act, by relying on the judgment of RASHMIKANT KUNDALIA Vs. UNION OF INDIA {(2015) 54 TAXMANN.COM 200 (Bombay) and LAKSHMINIRMAN BANGALORE (P) LTD Vs. DEPUTY COMMISSIONER OF INCOME TAX, GHAZIABAD {(2015) 60 TAXMANN.COM 144 (Karnataka). 29. It is well settled that if it is a charge for service rendered by the commercial agency and the amount of fee levied is based on the expenses incurred by the Government rendering the fee. Unlike the tax which is compulsory extraction of money, enforceable by law and not in return of any services rendered. The distinction between the tax and the fee is that tax is levied as a part of common burden while fee is payment for a special benefit of privilege. Fee confers some advantage and is a return of consideration for services rendered. 30. The Hon'ble Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e TDS statement. The revenue is right in contending that Section 234 (E) of the Act is meant to ensure that assessee files the statement in time, so that the Department can clear the returns of the persons connected with the assessee, i.e., from whom tax has been deducted at source without any delay and accurately with increasing or overloading the burden of the department. 33. A provision can be held unconstitutional only when the legislature was incompetent to bring out the legislation or that it offends some provision of the Constitution or when it is manifestly arbitrary. The Hon'ble Supreme Court in GOVERNMENT OF ANDHRA PRADESH Vs. SMT.P.LAXMI DEVI {(2008) 4 SCC ? 720}, wherein, the Hon'ble Supreme Court has observed as under:- ?46. In our opinion, there is one and only one ground for declaring an Act of the legislature (or a provision in the Act) to be invalid, and that is if it clearly violates some provision of the Constitution in so evident a manner as to leave no manner of doubt. This violation can, of course, be in different ways, etc., if a State legislature makes a law which only the Parliament can make under List I to the Seventh Schedule, in which case it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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