Section 234E is Late Fees on late filling of TDS Return and Not Penalty
Contention of petitioner:
- Section 234E of the Income Tax Act is penalty in the shape of a fee.
- Prior to the introduction of Section 234E, penalty for non-filing of the TDS statements was Rs.100/- per day as provided for under Section 272 A(2) (K) of the Act.
- 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. The fee under Section 234E 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.
- 234 E which levies a fee on delayed payment of TDS statement is neither compensatory fee nor is a regulatory fee.
- There is no relationship between levy of fee and the service that is sought to be rendered on the contrary it is submited that since no service has been rendered, fee should not be leviable at all.
- 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 Supreme Court has held that:-“It is Constitutionally impermissible for any State Government to collect any amount which is not strictly of the nature of a Fee in the Guise of a Fee. If in the Guise of a Fee the Legislature imposes a tax, it is for the Court on a scrutiny of the scheme of the levy to determine its real character.
Contention of Revenue:
The revenue contends that Section 200 of the Act casts duty on a person deducting tax at source to pay the same within a prescribed time, the sum so deducted to the credit of the Central Government. Tax Deduction at Source (TDS) is one of the modes of collection of taxes, under which a certain percentage of amounts are required to be deducted by a payer (the deductor) at the time of making/crediting certain specified payment to a payee (the deductee). The deducted sum i.e., TDS is required to be deposited to the credit of the Central Government within the prescribed time period. The deductee gets the credit of the amount so deducted against his tax liability on the basis of the information furnished by the deductor to the Income-tax department in the TDS statement. TDS as the very name implies aims at collection of revenue at the very source of income.
It is the contention of the respondents that Section 234 (E) of the Act, was introduced on 1/7/2012, to ensure that quarterly segments are filed promptly within the prescribed period of time.
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.
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 deductor, then the grievance of the deductee would be increased.
Levy does not cease to be a fee merely because there is an element of compulsion or coerciveness present in or not, nor is it a postulate of a fee that it must have a direct relation to the actual service rendered by the authority to each individual who obtains the benefit of the service.
It is also well settled that there need not be a mathematical precision between the fee levied and the service rendered.
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.
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 Rs.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.
Section 234 F is not violative of any of the other provisions of Income Tax Act or the Constitution of India. Nothing has been shown as to how the Section is manifestly arbitrary for it to be struck down.
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