Qatalys Software Technologies Private Limited v. Union of India / The Chairman CBDT, New Delhi / The Principal Chief CIT, Chennai / The Chief CIT (TDS) Chennai / The ITO Officer TDS Ward 2(1), Chennai / The ITO Officer TDS Ward 2(2), Chennai
[Citation -2020-LL-0311-54]

Citation 2020-LL-0311-54
Appellant Name Qatalys Software Technologies Private Limited
Respondent Name Union of India / The Chairman CBDT, New Delhi / The Principal Chief CIT, Chennai / The Chief CIT (TDS) Chennai / The ITO Officer TDS Ward 2(1), Chennai / The ITO Officer TDS Ward 2(2), Chennai
Court HIGH COURT OF MADRAS
Relevant Act Income-tax
Date of Order 11/03/2020
Judgment View Judgment
Keyword Tags constitutional validity • tax deduction at source • tax administration • income tax return • services rendered • reasonable cause • filing of return • levy of penalty • payment of tax • tax liability • tds statement • late payment • levy of fee • ultra vires • tds return
Bot Summary: Section 234 E, the vires of which is under challenge:- 234 - E of the Income Tax Act reads thus:- Fee for default in furnishing statements - Without prejudice to the provisions of the Act, where a person fails to deliver or cause to be delivered a statement within the time prescribed in sub-section of Section 200 or the proviso to sub- Section of Section 206 C,he shall be liable to pay, by way of fee, a sum of two hundred rupees for every day during which the failure continues. The amount of fee referred to in sub-Section 91) shall be paid before delivering or causing to be delivered a statement in accordance with sub-Section of Section 200 or the proviso to sub-Section of Section 206 C. The provisions of this Section shall apply to a statement referred to in sub-Section of Section 200 or the proviso to sub-Section 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. Section 234 E has the very same characteristics seen only in other penalty provisions under the same Act like Section 271 FA, 271 FB, 271 GB and Section 272 A;. 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;. Section 271 provides that no penalty shall be levied if the person proves that after paying tax deducted or collected along with fee and interest if any to the credit of the Central Government, he had delivered the statement referred to in sub- Section 3 of Section 200 or the provisio to sub-Section of Section 206 before the expiry of a period of one year. In order to examine as to whether the fee charged under Section 234E is in fact fee or penalty or compensatory tax, it could be seen from Section 199 of the Act that any deduction made in accordance with Section 200 to Section 206 would be treated as a payment of tax on behalf of the person from whose income the deduction was made. A bare perusal of Section 271H which came to be inserted by Finance Act, 2012 with effect from 01.07.2012 would indicate it provides for levy of penalty for failure to furnish statements of tax deducted at source under Section 200(3) or under proviso to Section 206C or for furnishing incorrect information. 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.


W.P.No.13331 of 2019, etc., batch IN HIGH COURT OF JUDICATURE AT MADRAS DATED: 11 /3/2020 CORAM HON'BLE MR.A.P.SAHI, CHIEF JUSTICE AND HON'BLE MR.JUSTICE SUBRAMONIUM PRASAD Writ Petition Nos.13331, 13114, 13118, 13337, 13377 and 13379 of 2019 and W.M.P.Nos.13257, 13259, 13443, 13447 and 13486 of 2019 Qatalys Software Technologies Private Limited rep. By its Director Kharedehal Venkata Abhiram Krishna S-16 Siddarth Thiru.Vi.Ka.Industrial Estate Guindy Chennai 600032. Petitioner in W.P.Nos.13331, 13337 of 2019 Q Source Global Consulting Private Limited rep. By its Director Kharedehal Venkata Abhiram Krishna S.16 Siddarth Thiru.Vi.Ka Industrial Estate Guindy Chennai 600032. Petitioner in W.P.Nos. 13114, 13118 of 2019 Jeans Park (India) Private Limited rep. By its Director Kamal Kumar Chhajer 565 Anna Salai, Teynampet Chennai 600 018. ... Petitioner in W.P.Nos. 13777 and 13379 of 2019 Page 1 of 33 http://www.judis.nic.in W.P.No.13331 of 2019, etc., batch Vs 1. Union of India rep. By its Secretary (Revenue) Ministry of Finance 128 North Block New Delhi 110 001. 2. Chairman Central Board of Direct Taxes North Block New Delhi 110 001. 3. Principal Chief Commissioner of Income Tax Chennai 121 MG Road, Nungambakkam Chennai 600 034. 4. Chief Commissioner of Income Tax (TDS) Chennai 121 M G Road, Nungambakkam Chennai 600 034. ... Respondents 1 to 4 in all writ petitions 5. Income Tax Officer TDS Ward 2 (1) Room No.108, 1st Floor, Tower 1 BSNL Building Greams Road Chennai 600 006. ... Fifth respondent in W.P.Nos.13331, 13114 of 2019 5. Income Tax Officer TDS Ward 2 (2) Room No.109, 1st Floor, Tower 1 BSNL Building Greams Road Chennai 600 006. ... Fifth respondent in W.P.Nos.13377 and 13379 of 2019 Page 2 of 33 http://www.judis.nic.in W.P.No.13331 of 2019, etc., batch Prayer in W.P.Nos.13331, 13118, 13377 of 2019:- Petition filed under Article 226 of Constitution of India praying for issuance of writ of declaration to declare Section 234 E of Income Tax Act, 1961 as ultra vires Constitution. Prayer in W.P.Nos.13114, 13337 and 13379 of 2019:- Petitions filed under Article 226 of Constitution of India praying for issuance of writ of certiorari to call for records relating to impugned Demand Notice C.No.2/Arrear/2018-19/TDS Ward 2 (1)/85, C.No.2/Arrear/2018- 19/TDS Ward 2 (1)/2 and C.No.2/Arrear/2018-19/TDS Ward 2 (2)/60, dated 25/2/2019 on file of fifth respondent and quash same. For petitioner ... Mr.Kabilan Manoharan For respondents ... Mr.Karthick Ranganathan ------ COMMON ORDER SUBRAMONIUM PRASAD,J W.P.Nos.13331, 13118 and 13377 of 2019 have been filed by Qatalys Software Technologies Private Limited, QSource Global Consulting Private Limited and Jeans Park (India) Private Limited, challenging vires of Section 234 E of Income Tax Act, 1961. Page 3 of 33 http://www.judis.nic.in W.P.No.13331 of 2019, etc., batch 2. W.P.Nos.13114, 13337 and 13379 of 2019 have been filed by QSource Global Consulting Private Limited, Qatalys Software Technologies Private Limited and Jeans Park (India) Private Limited, challenging demand notices raised by fifth respondent against them under Section 234 E along with Section 220 (2) and 201 (1) (A) of Income Tax Act, 1961. 3. Section 234 E, vires of which is under challenge:- 234 - E of Income Tax Act reads thus:- Fee for default in furnishing statements - (1) Without prejudice to provisions of Act, where person fails to deliver or cause to be delivered statement within time prescribed in sub-section (3) of Section 200 or proviso to sub- Section (3) of Section 206 C,he shall be liable to pay, by way of fee, sum of two hundred rupees for every day during which failure continues. (2). amount of fee referred to in sub-section (1) shall not exceed amount of tax deductible or collectible, as case may be. (3). amount of fee referred to in sub-Section 91) shall be paid before delivering or causing to be delivered statement in accordance with sub-Section (3) of Section 200 or proviso to sub-Section (3) of Section 206 C. (4). provisions of this Section shall apply to statement referred to in sub-Section (3) of Section 200 or proviso to sub-Section (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 case may be, on or after 1st day of July, 2012. Page 4 of 33 http://www.judis.nic.in W.P.No.13331 of 2019, etc., batch 4. petitioner contends that Section 234 E of Income Tax Act is penalty in shape of fee. It is submitted that prior to introduction of Section 234 E, penalty for non-filing of TDS statements was Rs.100/- per day as provided for under Section 272 (2) (K) of Act. It is submitted that Section 234 E deals with fee payable for default in filing TDS statement on 1/7/2012. According to petitioner, prescribed form for filing TDS statement did not have provision for payment of fine for default and fee under Section 234 E of Act can be collected only from 1/6/2015. It is submitted that Section 200 of Act was amended by insertion of Clause (c) to enable collection of fee under Section 234 in form prescribed under Section 200 (3) and processed under Section 200 (A) of Act. 5. petitioners have given tabular chart to demonstrate as to how Section 234 E is penalty disguised as fee. Sl. Section Relating to Inserted w.e.f. Remarks 1 200(3) Filing of TDS statement 01.04.2005 Penalty u/s 272A(2)(k) Page 5 of 33 http://www.judis.nic.in W.P.No.13331 of 2019, etc., batch Sl. Section Relating to Inserted w.e.f. Remarks inserted at same time Rs.100/Day 2 200A Processing of TDS 01.04.2010 Contains NO statement reference to fee payable u/s 234 E at this point of time. 3 234E Levying fee of 01.07.2012 Inserted for Rs.200/day for each day Liability of default in filing TDS statement 4 271H Penalty for default in 01.07.2012 Proviso to filing TDS statement. Sec.272A (Rs.10,000/- to inserted stating Rs.1,00,000/- No penalty no penalty for upto 1 year Delay) under Section after 01.07.2012 probably because 271 H was introduced 5 200A(1)- (a) to Fee u/s 234 E to be 01.06.2015 Inserted for (f) computed at time of Mode and processing TDS Enforceability. statement 6. It is stated that above table demonstrates that penalty provisions under Section 272A(2)(k) for delayed TDS return is now been levied as fee under Section 234 E for same default. It is therefore stated that Section 234 E is nothing but penalty disguised as fee for which no order is to be passed and no opportunity for Page 6 of 33 http://www.judis.nic.in W.P.No.13331 of 2019, etc., batch hearing need be given. 7. According to petitioner, 234 (E) is unreasonable restriction on trading business and thus violates Article 19 (1) (g) of Constitution of India. It is also stated that fee can be levied only for service rendered as compensatory fee or for any privilege that conferred which is in nature of regulatory fee. 234 E which levies fee on delayed payment of TDS statement is neither compensatory fee nor is regulatory fee. It is also submitted that there is no relationship between levy of fee and service that is sought to be rendered on contrary it is submited that since no service has been rendered, fee should not be leviable at all. Petitioner also states that fee has no correlation to benefit conferred and any way, as stated above, it could not have been applied retrospectively. 8. Petitioner states that present Section 234 E as fee for default in furnishing TDS statements with incrementally increasing fee for every continuing day in default is not justifiable and as stated Page 7 of 33 http://www.judis.nic.in W.P.No.13331 of 2019, etc., batch above Section 234 (E) is in fact penalty in guise of fee. challenge is inter alia on following grounds: (a). Section 234 E is verbatim transformation of earlier applicable/existing penalty provision (Section 272 (2) (k) and its proviso. (b). Section 234 E has very same characteristics seen only in other penalty provisions under same Act (Income Tax Act, 1961) like Section 271 FA, 271 FB, 271 GB and Section 272 (2); (c). Section 234 E has been purportedly inserted under Finance Bill, 2012 for Deterrence which is not purpose recognised by either Constitution or law laid down by Hon'ble Supreme Court; (d). Section 234 E is being described as Fee for Default in filing TDS statement as seen in Section Heading which is in direct conflict with laws of criminal jurisprudence; Page 8 of 33 http://www.judis.nic.in W.P.No.13331 of 2019, etc., batch (e). 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). fee levied under Section 234 E is not justifiable in context of no increasing/additional service being rendered to demand incrementally increasing fee for every additional day of continuing to be in default. 9. Petitioner relies on judgment of Hon'ble Supreme Court, in OM PRAKASH AGARWAL AND OTHERS Vs. GIRI RAJ KISHORI AND OTHERS {1986 (1) SCC -722}, wherein, Hon'ble Supreme Court has held that:- It is Constitutionally impermissible for any State Government to collect any amount which is not strictly of nature of Fee in Guise of Fee. If in Guise of Fee Legislature imposes tax, it is for Court on scrutiny of scheme of levy to determine its real character. 10. Petitioner further states that all assessees can file their Page 9 of 33 http://www.judis.nic.in W.P.No.13331 of 2019, etc., batch assessment only by April first at earliest (when there has been No TDS to their credit in last quarter Jan-March) or by June 1st (if there has been TDS to their credit in last quarter Jan-March) after providing for time until which Deductor has to file TDS Statement (March 31st or May 31st depending on whether TDS has been deducted in last quarter Jan-March to credit of Assessee/Deductee). Petitioner states that delayed filing of TDS statement which is any way filed either by March 31st or May 31st (depending on whether TDS has been deducted in last quarter Jan- March to credit of Assessee/Deductee) can cause no Difficulty in determining tax liability of Assessees and thus when there is no difficulty caused to Income Tax Department/Revenue, there can be no service that Income Tax can render to deductor who was in default of filing TDS statement within prescribed time but has filed same well within time before which Assessees/Deductees can file their assessment for tax liability and tax refund. It is submitted that even with failure to file TDS statement within prescribed time, there will be cases that will cause difficulty to IT/Revenue (when delayed filing is not completed before March 31st or May 31st depending Page 10 of 33 http://www.judis.nic.in W.P.No.13331 of 2019, etc., batch on whether TDS has been deducted in last quarter) and in those cases there will be no difficulty to Income Tax Department /Revenue and therefore it cannot be said that service is being provided for accepting belated returns. It is therefore stated that fee is nothing but penalty in guise of fee. 11. Petitioner further points out that with no penalty payable for delay in filing TDS statement within expiry of one year from prescribed period, fee to enable filing within that one year period (i.e., after prescribed period and within one year from trhe prescribed period) cannot be said to confer privilege which in any case already existed (ability to file TDS statement without any penalty even when there could be difficulty caused to IT/Revenue) and thus there is no privilege conferred on petitioner/deductee for which fee under Section 234 E is purportedly collected. 12. It is further submitted that with existing penalty for delay in filing TDS statement u/s 271H, Section 234 E being mere verbatim transformation of earlier existing penalty u/s 271 A(2)(k) now under Page 11 of 33 http://www.judis.nic.in W.P.No.13331 of 2019, etc., batch different nomenclature of Fee and thus penalty disguised as Fee making it in effect double penalty (in addition to Sec.271H) for same default, in violation of Article 20(2) of Constitution. 13. It is submitted that levy u/s 234 E as incrementally increasing Fee is not proportionate to extent of privilege conferred on deductor (by payment of this Fee) for delayed filing of TDS statement when Deductor does not even have to pay 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 Deductor for filing delayed TDS statement with Fee u/s 234 E and thus there is no rational nexus. 14. revenue contends that Section 200 of Act casts duty on person deducting tax at source to pay same within prescribed time, sum so deducted to credit of Central Government. Tax Deduction at Source (TDS) is one of modes of collection of taxes, under which certain percentage of amounts are Page 12 of 33 http://www.judis.nic.in W.P.No.13331 of 2019, etc., batch required to be deducted by payer (the deductor) at time of making/crediting certain specified payment to payee (the deductee). deducted sum i.e., TDS is required to be deposited to credit of Central Government within prescribed time period. deductee gets credit of amount so deducted against his tax liability on basis of information furnished by deductor to Income-tax department in TDS statement. TDS as very name implies aims at collection of revenue at very source of income. 15. It is contention of respondents that Section 234 (E) of Act, was introduced on 1/7/2012, to ensure that quarterly segments are filed promptly within prescribed period of time. It is stated by respondents that this fee is levied for reason that assessee is allowed to file TDS statement beyond prescribed period of time and this fee regularises late filing of TDS. It is contended that Section 234 of Act, is only for accepting TDS statement beyond period of time and Section 271 (H) imposes penalty of such late filing of statements. Section 271 (H) has been Page 13 of 33 http://www.judis.nic.in W.P.No.13331 of 2019, etc., batch introduced to prevent belated filing whereas Section 234 (E) is to regularise late payment of fee. 16. It is further submitted that there can be two provisions, one imposing penalty and other imposing fee. Under Section 271 (H) of Act, penalty is not less than Rs.10,000/- which may be extended upto Rs.1 lakh. Section 271 (H) (3) provides that no penalty shall be levied if person proves that after paying tax deducted or collected along with fee and interest if any to credit of Central Government, he had delivered statement referred to in sub- Section 3 of Section 200 or provisio to sub-Section (3) of Section 206 (C) before expiry of period of one year. It is therefore, submitted that principles of natural justice is inbuilt in Section 271 (H) of Act whereas 234 (E) of Act only provides for late fee of Rs.200/- per day till statement is filed. 17. It is further submitted that under Income Tax Act, there is obligation on Income-Tax Department to process income- tax return within specified period from date of filing. Page 14 of 33 http://www.judis.nic.in W.P.No.13331 of 2019, etc., batch department can process income tax return of person on whose behalf tax has been deducted only when information relating to details of tax deducted is furnished by deductor in TDS statement within prescribed time. timely processing of returns is bedrock of efficient tax administration system. Courts through various judgments have also called upon department to look into aspect of timely processing of returns and issue refunds. 18. It is further submitted that timely submission of TDS statement containing details of person on whose behalf tax is deducted becomes very crucial. Unless and until department receives details of tax deduction through TDS statement, timely processing of income tax returns having claim of TDS is not possible. In case, department goes ahead and processes income tax return of assessee having claim of TDS without giving credit for TDS due to non-filing of TDS details by deductor, then grievance of deductee would be increased. It is stated that non-filing of TDS returns by deductor on time has multitude Page 15 of 33 http://www.judis.nic.in W.P.No.13331 of 2019, etc., batch effects eroding credibility of efficient tax administration system. 19. It is further submitted that as per existing provisions of Income-Tax Act, person responsible for deduction of tax is required to furnish periodical TDS Statement (quarterly) containing details of deduction of tax made during quarter by prescribed due date. It was noticed that substantial number of deductors were not furnishing their TDS statement resulted in delay in granting of credit of TDS to person on whose behalf tax was deducted and consequently led to delay in issue of refunds to deductee or raising of infructuous demand against deductee and thereby increasing workload of department. It is submitted that timely furnishing of TDS statement is critical for processing of income-tax return of assessee having TDS claim because credit for tax deducted on behalf of deductee is granted to him only on basis of information furnished by deductor in TDS statement. It is therefore contention of Revenue that if there is delay in grant of credit then it will result in granting refund of tax deducted on behalf of Page 16 of 33 http://www.judis.nic.in W.P.No.13331 of 2019, etc., batch deductee by deductor along with interest at rate of half percent every month which is loss of revenue to department on account of lapse of filing statements by deductor. 20. Section 234 (E) of Act provides that where person fails to deliver statement within time prescribed, then he shall be liable to pay by way of fee, sum of Rs.200/- for every day during which failure continues. Act therefore, provides that late submission of fee is regularised by paying fee of Rs.200/- per day. 21. distinction between Sections 234 (E) and 271 (H) of Act is that Section 234 (E) is not in lieu of penalty. Both are independent levies. Section 271 (H) of Act provides that penalty would not be levied if tax with fee and interest is paid and statement is filed within one year from due on date. Section 234 (E) provides for payment at rate of Rs.200/- per day for every day's delay. Section 234 (E) cannot be called as penalty for which there is separate provision. legislature has power to levy fee for services provided and to levy penalty is deterrent. prompt submission of Page 17 of 33 http://www.judis.nic.in W.P.No.13331 of 2019, etc., batch statements makes it easier for tax authorities to correlate returns of other persons, on whose behalf tax has been deducted at source. 22. It is submitted that unless and until Department receives details of tax deduction through TDS statements, timely processing of Income Tax returns, having claim of TDS, is not possible. authorities are facing difficulties when they process IT returns of 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. 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 issue as to whether fee levied under Section 234 (E) of Act, is in fact tax or not, observed as under:- 12. On perusal of sub-section (1) of section 234E, it is clear that fee is sought to be levied inter alia on person who Page 18 of 33 http://www.judis.nic.in W.P.No.13331 of 2019, etc., batch fails to deliver or cause to be delivered TDS return/statements within prescribed time in sub-section (3) of section 200. fee prescribed is Rs.200/- for every day during which failure continues. Sub-section (2) further stipulates VRD 9 of 19 WP771/14 that amount of fee referred to in sub- section (1) shall not exceed amount of tax deductible or collectible as case may be. 13. It is not in dispute that as per existing provisions, person responsible for deduction of tax (the deductor) is required to furnish periodical quarterly statements containing details of deduction of tax made during quarter, by prescribed due date. Undoubtedly, delay in furnishing of TDS return/statements has cascading effect. Under Income Tax Act, there is obligation on Income Tax Department to process income tax returns within specified period from date of filing. Department cannot accurately process return on whose behalf tax has been deducted (the deductee) until information of such deductions is furnished by deductor within prescribed time. timely processing of returns is bedrock of efficient tax administration system. If income tax returns, especially having refund claims, are not processed in timely manner, then (i) delay occurs in granting of credit of TDS to person on whose behalf tax is deducted (the deductee) and consequently leads to delay in issuing refunds to deductee, or raising of infructuous demands against deductee; (ii) confidence of general taxpayer on tax administration is eroded; (iii) VRD 10 of 19 WP771/14 late payment of refund affects Government financially as Government has to pay interest for delay in granting refunds; and (iv) delay in receipt of refunds results into cash flow crunch, especially for business entities. 14. We find that Legislature took note of fact that substantial number of deductors were not furnishing their TDS retun/statements within prescribed time frame which was absolutely essential. This led to additional work burden upon Department due to fault of deductor by not furnishing information in time and which he was statutorily bound to furnish. It is in this light, and to compensate for additional work burden forced upon Department, that fee was sought to be levied under section 234E of Act. Looking at this from this perspective, we are clearly of view that section 234E of Act is not punitive in nature but fee which is fixed charge Page 19 of 33 http://www.judis.nic.in W.P.No.13331 of 2019, etc., batch for extra service which Department has to provide due to late filing of TDS statements. 15. As stated earlier, due to late submission of TDS statements means Department is burdened with extra work which is otherwise not VRD 11 of 19 WP771/14 required if TDS statements were furnished within prescribed time. This fee is for payment of additional burden forced upon Department. person deducting tax (the deductor), is allowed to file his TDS statement beyond prescribed time provided he pays fee as prescribed unde section 234E of Act. In other words, late filing of TDS return/statements is regularised upon payment of fee as set out in section 234E. This is nothing but privilege and special service to deductor allowing him to file TDS return/statements beyond time prescribed by Act and/or Rules. We therefore cannot agree with argument of Petitioners that fee that is sought to be collected under section 234E of Act is really nothing but collection in guise of tax. 16. We are supported in our view by judgement of division bench of Calcutta High Court in case of Howrah Tax Payers' Association Vs. Government of West Bengal and Anr. 2 Before Calcutta High Court, constitutional validity of imposition of "late fee" under section 32(2) of West Bengal Value Added Tax Act, 2003 came up for consideration. After analysing provisions of Bengal 2 (2011) 5 CHN 430 : 2010 SCC OnLine Cal 2520 VRD 12 of 19 WP771/14 Value Added Tax Act, Calcutta High Court held as under:- "10. In case of levying tax there is no quid pro quo between Tax payer and State. But element of quid pro quo is must in case of imposing Fee. By virtue of impugned amendment, dealer is entitled to get service indirectly from authority upon payment of late fee. His irregular filing of return is regularised upon payment of late fee without being suffered from penal consequences which can not be categorised as nothing but special service. Thus, there exists quid pro quo in imposing late fee. Page 20 of 33 http://www.judis.nic.in W.P.No.13331 of 2019, etc., batch 11. In this context it is pertinent to mention here that though fee must be co-related to services rendered, such relationship need not be mathematical one even casual co-relationship in all that is necessary. view of Apex Court in (2005) 2 SCC 345 (referred to by learned Tribunal at page 14 of impugned judgement) removed all doubts on this issue." (emphasis supplied) 17. It would also be apposite to refer to observations of Supreme Court in case Sona Chandi Oal Committee v. State of Maharashtra3, and which judgement has been referred to by Calcutta High Court. Supreme Court, in paragraph 22 stated thus:- "22. three-Judge Bench of this Court in B.S.E. Brokers' Forum v. Securities and Exchange Board of India [(2001) 3 SCC 482] after considering large number of authorities, has held that much ice has melted in Himalayas after rendering of earlier judgments as there was sea change in judicial thinking as to difference between tax and fee since then. Placing reliance on following judgments of this Court in last 20 years, namely, Sreenivasa General Traders v.State of A.P. [(1983) 4 SCC 353] , City Corpn. of Calicut v. Thachambalath Sadasivan[(1985) 2 SCC 112 : 1985 SCC (Tax) 211] , Sirsilk Ltd. v. Textiles 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 traditional concept of quid pro quo in Page 21 of 33 http://www.judis.nic.in W.P.No.13331 of 2019, etc., batch fee has undergone considerable transformation. So far as regulatory fee is concerned, service to be rendered is not condition precedent and same does not lose character of fee provided fee so charged is not excessive. It was not necessary that service to be rendered by collecting authority should be confined to contributories alone. levy does not cease to be fee merely because there is element of compulsion or coerciveness present in it, nor is it postulate of fee that it must have direct relation to actual service rendered by authority to each individual who obtains benefit of service. Quid pro quo in strict sense was not always sine qua non for fee. All that is necessary is that there should be reasonable relationship between levy of fee and services rendered. It was observed that it was not necessary to establish that those who pay fee must receive direct or special benefit or advantage of services rendered for which fee was being paid. It was held that if one who is liable to pay, receives general benefit from authority levying fee, element of service required for collecting fee is satisfied."(emphasis supplied) 18. We are therefore clearly of view that fee sought to be levied under section 234E of Income Tax Act, 1961 is not in guise of tax that is sought to be levied on deductor. We also do not find provisions of section 234E as being onerous on ground that section does not empower Assessing Officer to condone delay in late filing of TDS return/statements, or that no appeal is provided for from arbitrary order passed under section 234E. It must be noted that right of appeal is not matter of right but is creature of statute, and if Legislature deems it fit not to provide remedy of appeal, so be it. Even in VRD 14 of 19 WP771/14 such scenario it is not as if aggrieved party is left remediless. Such aggrieved person can always approach this Court in its extra ordinary equitable jurisdiction under Article 226 / 227 of Constitution of India, as case may be. We therefore cannot agree with argument of Petitioners that simply because no Page 22 of 33 http://www.judis.nic.in W.P.No.13331 of 2019, etc., batch remedy of appeal is provided for, provisions of section 234E are onerous. Similarly, on same parity of reasoning, we find argument regarding condonation of delay also to be wholly without any merit. 24. We are in complete agreement with aforesaid judgment. As stated by Hon'ble Supreme Court, in SONA CHANDI OAL COMMITTEE AND OTHERS Vs. STATE OF MAHARASHTRA {(2005) 2 SCC 345, levy does not cease to be fee merely because there is element of compulsion or coerciveness present in or not, nor is it postulate of fee that it must have direct relation to actual service rendered by authority to each individual who obtains benefit of service. 25. It is also well settled that there need not be mathematical precision between fee levied and service rendered. similar issue arose in Delhi High Court. Division Bench of Delhi High Court in BISWAJIT DAS Vs. Union of India {(2019) 103 TAXMANN.COM 290 (DELHI), while dealing with constitutionality of said Section, upheld Section 238 (E) of Act. Relevant paragraphs are extracted hereunder:- Page 23 of 33 http://www.judis.nic.in W.P.No.13331 of 2019, etc., batch 27. Upon conspectus of above, it is clear that fee imposed under Section 234E is levied towards regularisation of delay in filing of TDS return or statement, since Income Tax Department has to expend extra effort and resources for processing delayed TDS returns or statements; and possibly also incurs additional burden of interest to be paid to assessee on whose account tax deduction has been made. 28. We further hold that describing levy under Section 234E as fee does not invalidate imposition made. We may also point-out overarching principle that manner of description of levy, in this case, calling levy made under Section 234E of Act fee , cannot be sole basis of judging true nature or validity of levy. Section 234E affords person deducting tax at source evident benefit of relaxation of timelines for furnishing statement of tax so deducted. fee imposed under Section 234E of Act is for all intents and purposes late fee payable for accepting TDS statement/return at belated point in time. 29. As sequitur to foregoing discussion, we hold that provisions of Section 234E of Act imposing fee for delayed filing of statement of tax deducted at source are not ultravires provisions of Constitution. 26. constitutional authority has also been upheld by High Court of Karnataka in LAKSHMINIRMAN BANGALORE (P) LTD Vs. DEPUTY COMMISSIONER OF INCOME TAX, GHAZIABAD {(2015) 60 TAXMANN.COM 144 (Karnataka), and relevant paragraphs are extracted hereunder:- 13. main thrust of arguments addressed by Page 24 of 33 http://www.judis.nic.in W.P.No.13331 of 2019, etc., batch Learned Advocates appearing on behalf of petitioners as noticed hereinabove is that levy of fee under Section 234E for default in furnishing statements is in guise of penalty and there is no nexus to services rendered by department. In order to examine as to whether fee charged under Section 234E is in fact fee or penalty or compensatory tax, it could be seen from Section 199 of Act that any deduction made in accordance with Section 200 to Section 206 would be treated as payment of tax on behalf of person from whose income deduction was made. assessee while computing his income for being assessed under self assessment as provided under Section 140A will construe deductions made on his behalf as component in his return of income for claiming deduction in payment of tax. bare perusal of Section 244A of Act would indicate that where refund of any amount becomes due to assessee under Act, such assessee would be entitled to receive in addition to amount of refund of tax, simple interest at rate of one-half percent for every month or part of month comprised in period from 1st day of April of assessment year to date on which refund is granted as indicated in sub-Section (1)(a) of Act. bare perusal of Section 271H which came to be inserted by Finance Act, 2012 with effect from 01.07.2012 would indicate it provides for levy of penalty for failure to furnish statements of tax deducted at source under Section 200(3) or under proviso to Section 206C or for furnishing incorrect information. As per sub- Section (2), penalty will be not less than Rs. 10,000/- and it may extend upto Rs. 1,00,000/-. Section 273B indicates that no penalty shall be imposable on person or assessee for any failure referred to in 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. contention of assessee is that there is no similar provision in impugned provision namely Section 234E and as such it takes away valuable right of assessee. said contention does not hold water inasmuch as Section 119(2)(a) enables 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 Page 25 of 33 http://www.judis.nic.in W.P.No.13331 of 2019, etc., batch Section 201 and as such no hardship would be caused to assessees. As such contention raised in this regard cannot be accepted. 20. There cannot be any dispute to fact that assessee is required to file e-retums to Central Processing Centre CPC for processing of statements of tax deducted at source vide Section 200A, which provision is in para materia with Section 143(1). While processing return of income under Section 143(1)(a) no personal hearing is provided to assessee and as such same is also not provided under Section 200A. Thus, doctrine of principles of natural justice is given go by under impugned provision or its violation thereof would not be ground available to petitioners to challenge impugned provision on this ground. Hence, contention raised in this regard is without merit and stands rejected. 21. person responsible for deduction of tax namely deductor is required to furnish periodical statements containing details of deduction of tax within prescribed due date. Any delay in furnishing TDS statements would result in perennial problems being faced by department while processing return of income filed by assessees. When return of income is filed by assessee statutory obligation is cast on department to process said return of income within specified period from date of filing. If for want of details such return of income not being processed or assessment order not being framed or would be stalled or in other words return of income filed by assessee on whose behalf tax has already been deducted by deductor is not furnished within prescribed time by such deductor, it would consequently have cascading effect namely, it would stall processing of return of income filed by deductee. In given case, there might be instances of where assessee would be entitled to refund and on account of delay occurring due to non delivery of TDS statements by deductors, it would result in delay in extending credit of TDS to person on whose behalf tax is deducted and consequently it would result in delayed issuance of refunds to deductee or raising of consequential demands against deductee which otherwise would not have been raised. In this lengthy and unwarranted process it may erode confidence reposed by tax payer on department. Last but not least, it would result in financial burden to Government namely on Page 26 of 33 http://www.judis.nic.in W.P.No.13331 of 2019, etc., batch 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 constitutional validity of Section 200 of Act, by relying on 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). 28. It is well settled that if it is charge for service rendered by commercial agency and amount of fee levied is based on expenses incurred by Government rendering fee. Unlike tax which is compulsory extraction of money, enforceable by law and not in return of any services rendered. distinction between tax and fee is that tax is levied as part of common burden while fee is payment for special benefit of privilege. Fee confers some Page 27 of 33 http://www.judis.nic.in W.P.No.13331 of 2019, etc., batch advantage and is return of consideration for services rendered. 29. Hon'ble Supreme Court in Jindal Stainless Steel v. State of Haryana {(2006) 145 STC 544 (SC), while laying down parameters of judicially evolved concept of ?compensatory tax? vis-a-vis Article 301 has explained difference between tax, fee and compensatory tax in following manner: "?42. To sum up, basis of every levy is controlling factor. In case of ?a tax?, levy is part of common burden based on principle of ability or capacity to pay. In case of ?a fee?, basis is special benefit to payer (individual as such) based on principle of equivalence. When tax is imposed as part of regulation or as part of regulatory measure, its basis shifts from concept of ?burden? to concept of measurable/quantifiable benefit and then it becomes ? compensatory tax? and its payment is then not for revenue but as reimbursement/recompense to service/facility provider. It is then tax on recompense, Compensatory tax is by nature hybrid but it is more closer to fees than to tax as both fees and compensatory taxes are based on principle of equivalence and on basis of reimbursement/recompense. If impugned law chooses activity like trade and commerce as criterion of its operation and if effect of operation of enactment is to impede trade and commerce then Article 301 is violated?. Page 28 of 33 http://www.judis.nic.in W.P.No.13331 of 2019, etc., batch 30. It is also noted that Hon'ble Division Bench of High Court of Punjab, in Dr.AMRIT LAL MANGAL Vs. UNION OF INDIA {(2015) 62 TAXMANN.COM 310 (PUNJAB & HARYANA), and Hon'ble Division Bench of High Court of Rajasthan in DUNDLOD SHIKSHAN SANSTHAN Vs. UNION OF INDIA {(2015) 63 TAXMANN.COM 243 (RAJASTHAN) has also upheld validity of Section 234 (E) of Act. 31. Revenue is right in contending that Section 234 (E) of Act is not 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 above two conditions are satisfied, then penalty is not leviable. On other hand, Section 234 (E) of Act is only late fee at rate of Rs.200/- per day. As held in judgments relied above, Section 234 (E) of Act is purely compensatory and is special benefit to advantage of assessee as well for belatedly filing TDS statement. revenue is right in contending that Section 234 (E) of Act is meant to ensure that assessee files statement in time, so that Department can clear returns of Page 29 of 33 http://www.judis.nic.in W.P.No.13331 of 2019, etc., batch persons connected with assessee, i.e., from whom tax has been deducted at source without any delay and accurately with increasing or overloading burden of department. 32. provision can be held unconstitutional only when legislature was incompetent to bring out legislation or that it offends some provision of Constitution or when it is manifestly arbitrary. Hon'ble Supreme Court in GOVERNMENT OF ANDHRA PRADESH Vs. SMT.P.LAXMI DEVI {(2008) 4 SCC ? 720}, wherein, Hon'ble Supreme Court has observed as under:- ?46. In our opinion, there is one and only one ground for declaring Act of legislature (or provision in Act) to be invalid, and that is if it clearly violates some provision of Constitution in so evident manner as to leave no manner of doubt. This violation can, of course, be in different ways, etc., if State legislature makes law which only Parliament can make under List I to Seventh Schedule, in which case it will violate Article 246 (1) of Constitution, or law violates some specific provision of Constitution (other than directive principles). But before declaring statute to be unconstitutional, Court must be absolutely sure that there can be no manner of doubt that it violates provision of Constitution. If two views are possible, one making statute constitutional and other making it unconstitutional, Page 30 of 33 http://www.judis.nic.in W.P.No.13331 of 2019, etc., batch former view must always be preferred. Also, Court must make every effort to uphold constitutional validity of statute, even if that requires giving strained construction or narrowing down its scope vide Rt.Rev.Msgr.Mark Netto Vs. State of Kerala SCC para 6:Air para 6. Also, it is none of concern of Court whether legislation in its opinion is wise or unwise. 67. Hence if two views are possible, one making provision in statute constitutional, and other making it unconstitutional, former should be preferred vide Kedarnath Singh vs. State of Bihar. Also, if it is necessary to uphold constitutionality of statute to construe its general words narrowly or widely, Court should do so vide G.P.Singh-s Principles of Statutory Interpretation, 9th Edition, 2004 page 497. Thus ... would have become unconstitutional. 68. Court must, therefore, make every effort to uphold constitutional validity of statute, even if that requires giving statutory provision strained meaning, or narrower or wider meaning, than what appears on face of it. It is only when all efforts to do so fail should Court declare statute to be unconstitutional. 80. However, we find no paradox at all. As regards economic and other regulatory legislation judicial restraint must be observed by Court and greater latitude must be given to legislature while adjudging constitutionality of statute because Court does not consist of economic or administrative experts. It has no expertise in these matters, and in this age of specialisation when policies have to be laid down with great care after consulting specialists in field, it will be wholly unwise for Court to encroach into domain of Page 31 of 33 http://www.judis.nic.in W.P.No.13331 of 2019, etc., batch executive or legislative (sic legislature) and try to enforce its own views and perceptions.? 33. Parliament is competent to pass legislation on Taxes in Income under Entry 82 of List I to Seventh Schedule. Section 234 F is not violative of any of other provisions of Income Tax Act or Constitution of India. Nothing has been shown as to how Section is manifestly arbitrary for it to be struck down. 34. In view of above, W.P.Nos.13331, 13118 and 13377 of 2019 fail and are hereby dismissed. Since levy is constitutional, challenge to demand notices also fail. Accordingly, W.P.Nos.13114, 13337 and 13379 of 2019 are also dismissed. No costs. Consequently, connected Miscellaneous Petitions are closed. (A.P.S., CJ.) (S.P.,J.) 11/3/2020 Index: Yes/No Internet: yes/No Speaking/Non-speaking order mvs/pkn. Page 32 of 33 http://www.judis.nic.in W.P.No.13331 of 2019, etc., batch HON'BLE CHIEF JUSTICE and SUBRAMONIUM PRASAD, J. mvs/pkn. Pre-delivery common order in Writ Petition Nos.13331, 13114, 13118, 13337, 13377 and 13379 of 2019 11/3/2020 Page 33 of 33 http://www.judis.nic.in Qatalys Software Technologies Private Limited v. Union of India / Chairman CBDT, New Delhi / Principal Chief CIT, Chennai / Chief CIT (TDS) Chennai / ITO Officer TDS Ward 2(1), Chennai / ITO Officer TDS Ward 2(2), Chennai
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