TMI Blog2015 (8) TMI 379X X X X Extracts X X X X X X X X Extracts X X X X ..... m the 1st day of April of the assessment year to the date on which refund is granted as indicated in sub-section(1)(a) of the Act. 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat under the newly inserted Section 234E of the Act, fee could be levied only after affording the petitioners a reasonable opportunity and for consequential relief of quashing the intimations whereunder fee has been levied under Section 234E for late filing of TDS statements. 2. I have heard the arguments of Sriyuths K.P.Kumar, M.V.Seshachala, learned Senior Advocates, Sriyuths P.Dinesh, Smt.Jinita Chatterjee for Sri.S.Parthasarathi, R.Ramamurthy R., Chythanya K.K., S.R.Shivaprakash, Chaitanya V. Mudrabettu, Aravind V. Chavan, T.Suryanarayana, Smt.Lakshmy Iyengar, Ashok A. Kulkarni, Balram R. Rao, Smt.Vani H., Shankar A., learned advocates appearing for petitioners and Sri.K.V.Aravind, learned Senior standing counsel along with Sri.Jeevan J. Neeralagi appearing for respondents. 3. The learned advocates appearing for the petitioners have contended as under: (a) Levy or impost is regarded as a written or consideration for services rendered and in the instant case the Government is not providing any service to the deductors and as such levy of fee under Section 234E of the Act is invalid. (b) The imposition of a 'fee' on tax deductors without any corresponding ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deducted at source and having been remitted to the credit of the Central Government by the deductors within the stipulated time, no loss is caused to exchequer and as such the impugned levy under Section 234E of the Act amounts to abuse of legislative power. (j) The impugned provision is violative of Article 19(1)(g) of the Constitution of India as it imposes unreasonable restriction on the business carried on by petitioners by imposing unnecessary and excessive levies under the garb of a 'fee'. (k) When various causes for delay in filing of the statements of taxes deducted at source would be there, if same is not taken into account, it would lead to unreasonable and unwarranted hardship to the deductors and therefore imposition of fee without affording an opportunity of hearing to explain the cause for such delay has to be struck down as being opposed to principles of natural justice. (l) The Department itself is not clear as to whether it is a fee' or a penalty' or what service is being rendered and if so, to whom. But on the other hand, the objects or reasons for introducing the impugned Section 234E would indicate it is qualitatively imposition of pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 - Krishi Upaj Mandi Samiti and others Vs Orient Paper and Industries Ltd. (18) AIR 1981 SC 1863 - Southern Pharmaceuticals and Chemicals, Trichur and others Vs State of Kerala and others (19) W.P.6918-6938/2014 (20) (1980) 1 SCC 416 - Kewal Krishan Puri and anr Vs State of Punjab and another 4. Per contra, the learned panel counsel Sriyuths K.V.Aravind and Jeevan J. Neeralagi would support the impugned provision and contend that the 'fee' leviable by the impugned provision has nothing to do with quantum of money involved and it is based on the number of days delay in filing the TDS statements. They would elaborate their submissions by contending that tax deduction at source (TDS) is one of the modes of collection of taxes which after deduction by the deductor, same is required to be credited to the account of the Central Government within a prescribed period and thereby the deductee gets the credit of the amount so deducted against his tax liability and same can be taken note off by the jurisdictional assessing Officer of deductee only on the information that would be furnished by the deductor to the Department. It is contended that the significance of TDS lie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Industries Ltd., (4) (2004) 8 SCC 556- State of H.P Others vs. Shivalik Agro Poly Products others (5) (1995) 215 ITR 758 (kar.) Union Home Products Ltd Others vs. Union of India others (6) 1989 Supp(1) SCC 696- P.M. Aswathanarayana Setty Others vs. State of Karnataka (7) (1996) 1 SCC 345- Secretary Government of Madras vs. P.R. Sriramulu and another (8) (2008) 4 SCC 720- Government of Andhra Pradesh vs. P. Laxmi Devi 8. Having heard the learned advocates appearing for the parties and on perusal of the pleadings as well as case laws relied upon by the learned advocates appearing for the parties, this Court is of the considered view that only issue which requires to be examined is: Whether Section 234E of the Income Tax Act, 1961 inserted by Finance Act, 2012 is to be struck down or its validity is to be upheld? PREFACE: 9. The Courts normally lean against a construction which reduces the statute to a futility. The maxim ut res magis valeat quam pereat - a liberal construction should be put upon written instruments, so as to uphold them, if possible, and carry into effect the intention. It is on application of this principle that Courts wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the total income of the previous year of every person: Provided that where by virtue of any provision of this Act income-tax is to be charged in respect of the income of a period other than the previous year, income-tax shall be charged accordingly. Instructions to subordinate authorities. 119. (1) xxx (2) Without prejudice to the generality of the foregoing power,- (a) the Board may, if it considers it necessary or expedient so to do, for the purpose of proper and efficient management of the work of assessment and collection of revenue, issue, from time to time (whether by way of relaxation of any of the provisions of Sections [115P, 115S, 115WD, 115WE,115WF, 115WG, 115WH, 115WJ, 115WK,] [139,] 143, 144, 147, 148, 154, 155 [158BFA], [sub-section (1A) of Section 201, Sections 210, 211, 234A, 234B, 234C], 271 and 273 or otherwise), general or special orders in respect of any class of incomes [or fringe benefits] or class of cases, setting forth directions or instructions (not being prejudicial to assessees) as to the guidelines, principles or procedures to be followed by other income-tax authorities in the work relating to assessment or collection of revenue or the init ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to sub-section (3) of Section 206C. (4) The provisions of this section shall apply to a statement referred to in subsection (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. Penalty for failure to furnish statements, etc.- 271H. (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 subsection (3) of Section 206C ; or (b)furnishes incorrect information in the statement which is required to be delivered or cause to be delivered under sub-section (3) of Section 200 or the proviso to sub-section (3) of Section 206C. (2) The penalty referred to in subsection (1) shall be a sum which shall not be less than ten thousand rupees but which may extend to one lakh rupees. (3) Notwithstanding anything contained in the foregoing provisions of this Section, no penalty shall be l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31A. (1) Every person responsible for deduction of tax under Chapter XVII-B, shall, in accordance with the provisions of sub-section (3) of Section 200, deliver, or cause to be delivered, the following quarterly statements to the Director General of Income-tax (Systems) or the person authorised by the Director General of Income-tax (Systems), namely:- (a) Statement of deduction of tax under Section 192 in Form No. 24Q; (b) Statement of deduction of tax under Sections 193 to 196D in- (i) Form No. 27Q in respect of the deductee who is a nonresident not being a company or a foreign company or resident but not ordinarily resident; and (ii) Form No. 26Q in respect of all other deductees. 2) Statements referred to in sub-rule (1) for the quarter of the financial year ending with the date specified in column (2) of the Table below shall be furnished by- (i) the due date specified in the corresponding entry in column (3) of the said Table, if the deductor is an office of Government; and (ii) the due date specified in the corresponding entry in column (4) of the said Table, if the deductor is a person other than the person referred to in clause (i) 3) (i) The stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of sub-section (6) of Section 194C by the payee;] (vii) furnish particulars of amount paid or credited on which tax was not deducted in view of the furnishing of declaration under sub-section (1) or sub-section (1A) or subsection (1C) of Section 197A by the payee] (viii) furnish particulars of amount paid or credited on which tax was not deducted in view of the notification issued under subsection (1F) of Section 197A] (5) The Director General of Income-tax (Systems) shall specify the procedures, formats and standards for the purposes of furnishing and verification of the statements or claim for refund in Form 26B and shall be responsible for the dayto- day administration in relation to furnishing and verification of the statements or claim for refund in Form 26B in the manner so specified.] (6) Where a statement of tax deducted at source is to be furnished for tax deducted before the 1st day of April, 2010, the provisions of this rule and rule 37A shall apply as they stood immediately before their substitution or omission by the Income-tax (Sixth Amendment) Rules, 2010]. ANALYSIS OF STATUTORY PROVISIONS: 12. Section 4 of the Act is the charging Section. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whose income, tax has been paid. Section 204 defines persons responsible for paying the tax deducted at source. Such responsibility depends upon category of payment. Section 205 makes it clear that where tax is deductible at source under the provisions of the Act, the assessee himself will not be called upon to pay the tax to the extent to which tax had been deducted from the income. Section 206 makes it obligatory on the part of the person deducting the tax at source to file a return within the prescribed time in the prescribed form. Section 206C deals with the procedure of tax collection at source. Section 200(3) or proviso to Section 206C(3) would require a person to deliver a statement as required in the respective section. If the statement is not furnished within the time prescribed, deductor is liable to pay, by way of fee, a sum of ₹ 200/- for every day during which the failure continues and such fee would not exceed the tax deductible or collectable as per Section 234E of the Act. DISCUSSION AND CONCLUSION: 13. The main thrust of the arguments addressed by the learned advocates appearing on behalf of the petitioners as noticed hereinabove is that the levy of fe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 assessees. As such contention raised in this regard cannot be accepted. 14. Now turning my attention to the issue regarding the construction of the levy of fee contemplated under the impugned provision namely as to whether it is in disguise a 'tax' or a 'fee simplicitor' or it is 'compensatory tax', it requires to be noticed that tax is a compulsory extraction of money by the Government and fee is an amount received towards expenditure for rendering the service. The Hon'ble Apex Court in the case of THE COMMISSIONER, HINDU RELIGIOUS ENDOWMENTS, MADRAS V. SRI LAKSHMINDRA THIRTHA SWAMIAR OF SRI SHIRUR MUTT, reported in AIR 1954 SC 282 has succinctly laid down the law on this issue having explained the distinction of these levies. It has been held that a tax is a compulsory extraction of money by public authority for public purposes enforceable by law and is not payment for services rendered. A fee is generally defined to be a charge for a specia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he fact that payment is enforceable by law against an individual in spite of his unwillingness or want of consent and this element is present in taxes as well as in fees. (5)The distinction between a tax and a fee lies primarily in the fact that a tax is levied as a part of the common burden while a fee is a payment for a special benefit or privilege. Fees confer a special capacity although the special advantage is secondary to the primary motive of regulation in the public interest. Public interest seems to be at the basis of all impositions but in a fee it is some special benefit which is conferred and accruing which is the reason for imposition of the levy. In the case of a tax, the particular advantage if it exists at all, is an incidental result of State action. A fee is a sort of return or consideration for services rendered and hence it is primarily necessary that the levy of fee should on the face of the legislative provision be correlated to the expenses incurred by Government in rendering the services. As indicated in Article 110(2) of the Constitution ordinarily there are two classes of cases where Government imposes fees upon persons. The first is of grant of permiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fee. While conferring some special benefits on the payers of the fees, it is permissible to render service in the general interest of all concerned. The element of quid pro quo is not possible or even necessary to be established with arithmetical exactitude. But it must be established broadly and reasonably that the amount is being spent for rendering services to those on whom the burden of the fee falls. There is no postulate of a fee that it must have a direct relation to the actual services rendered by the authorities to each individual to obtain the benefit of the service. The element of quid pro quo in the strict sense is not always a sine qua non for a fee. The element of quid pro quo is not necessarily absent in every tax. It is enough if there is a broad, reasonable and general corelationship between the levy and the resultant benefit to the class of people on which the fee is levied though no single payer of the fee receives direct or personal benefit from those services. It is immaterial that the general public may also be benefited from some of the services if the primary service intended is for the payers of the fees. (8) Absence of uniformity is not a criterion on w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service/facility provider. It is then a 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 the principle of equivalence and on the basis of reimbursement/recompense. If the impugned law chooses an activity like trade and commerce as the criterion of its operation and if the effect of the operation of the enactment is to impede trade and commerce then Article 301 is violated . 17. The element of quid pro quo would not be always a sine qua non for levy of fee. If there is broad correlationship between the two it would suffice. The Hon'ble Apex Court in MUNICIPAL CORPORATION OF DELHI OTHERS VS. MOHD. YASIN reported in (1983) 3 SCC 229 has held to the following effect: 9. What do we learn from these precedents? We learn that there is no generic difference between a tax and a fee, though broadly a tax is a compulsory exaction as part of a common burden, without promise of any special advantages to classes of taxpayers whereas a fee is a payment for services rendered, benefit provided or privilege conferred'. Compulsion is not the hall-mark of the distinction between a tax an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... correlationship between the levy and the services rendered (sic or) expected is one of general character and not of Mathematical exactitude. All that is necessary is that there should be a reasonable relationship between levy of the fee, and the services rendered. If authority is needed for this pro position, it is to be found in the several decisions of this Court drawing a distinction between tax' and fee'. See: The Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt, supra; H. H. Sundhundra Thirtha Swamiar v. Commissioner for Hindu Religious Charitable Endowments, Mysore, The Hingir-Rampur Coal Co. Ltd. v. State of Orissa; H.H. Shri Swamiji of Shri Admar Mutt vs. Commissioner, Hindu Religious Charitable Endowments Department; Southern Pharmaceuticals Chemicals, Trichur Ors. etc. v. State of Kerala Ors. etc., and Municipal Corporation of Delhi Ors., v. Mohd. Yasin, 32. There is no generic difference between a tax and a fee. Both are compulsory exactions of money by public authorities. Compulsion lies in the fact that payment is enforceable by law against a person inspite of his unwillingness or want of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amined in considerable detail by a three Judge Bench in Sreenivasa General Traders. vs. State of Andhra Pradesh (AIR 1983 SC 1246) and in paragraphs 30 and 31 of the judgment, the Court held as under: (SCC pp.380-81, paras 31-32) The traditional view that there must be actual quid pro quo for a fee has undergone a sea change subsequent to decision in Kewal Krishan Puri vs. State Of Punjab (AIR 1980 SC 1008). Correlationship between the levy and the services rendered/expected is one of general character and not of mathematical exactitude. All that is necessary is that there should be a reasonable relationship between the levy of the fee and the services rendered. Moreover, there is no generic difference between a tax and a fee. Both are compulsory exactions of money by public authorities. Compulsion lies in the fact that payment is enforceable by law against a person in spite of his unwillingness or want of consent. A levy in the nature of a fee does not cease to be of that character 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 direct relation to the actual service rendered by the authority to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a go by under impugned provision or its violation thereof would not be a ground available to the petitioners to challenge the impugned provision on this ground. Hence, contention raised in this regard is without merit and stands rejected. 21. A person responsible for deduction of tax namely deductor is required to furnish periodical statements containing the details of deduction of tax within the prescribed due date. Any delay in furnishing TDS statements would result in perennial problems being faced by the department while processing the return of income filed by the assessees. When a return of income is filed by an assessee a statutory obligation is cast on the department to process the said return of income within the specified period from the 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 the return of income filed by an assessee on whose behalf the tax has already been deducted by the deductor is not furnished within the prescribed time by such deductor, it would consequently have cascading effect namely, it would stall the processing of the return of income filed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rding condonation of delay also to be wholly without any merit . This Court is in complete agreement with the view expressed by Mumbai High Court and as such contention of the petitioners cannot be accepted for this reason also. 23. This Court in exercise power vested under Article 226 of the Constitution can declare a statute or a provision in the statute as unconstitutional and there cannot be any dispute with regard to this proposition. However, such power would be exercised where it is clear that impugned Act or provision is beyond its legislative competence or violates the provisions of the Constitution of India. Where two views are possible, one making the statute constitutional and the other making it unconstitutional the former would prevail or would be preferred. Every effort would be made by the Courts to uphold the constitutional validity of the statute even if it requires giving a constrained construction or narrowing down its scope. The Courts would not sit in arm chair of the legislature to examine as to whether the impugned legislation in its opinion is wise or unwise. Further the statutes relating to economic activities of the State would be viewed with greate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aning, than what appears on the face of it. It is only when all efforts to do so fail should the Court declare a 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 the Court and greater latitude must be given to the legislature while adjudging the constitutionality of the statute because the Court does not consist of economic or administrative experts. It has no expertise in these matters, and in this age of specialization when policies have to be laid down with great care after consulting the specialists in the field, it will be wholly unwise for the Court to encroach into the domain of the executive or legislative (sic legislature) and try to enforce its own views and perceptions. 24. Thus, viewed from any angle it cannot be held that Section 234E of the Income Tax Act, 1961 suffers from any vices for being declared to be ultra vires of the Constitution. In other words it has to be held that the impugned Section i.e., 234E of the Income Tax Act, 1961 is intra vires of the Constitution. 25. For the reasons assigned hereinabove, I do not find any merit in these ..... X X X X Extracts X X X X X X X X Extracts X X X X
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