TMI Blog2019 (1) TMI 604X X X X Extracts X X X X X X X X Extracts X X X X ..... deducting tax at source the evident benefit of relaxation of timelines for furnishing a statement of the tax so deducted. The fee imposed under Section 234E of the Act is for all intents and purposes a late fee payable for accepting the TDS statement/return at a belated point in time. As a sequitur to the foregoing discussion, we hold that the provisions of Section 234E of the Act imposing a fee for delayed filing of statement of tax deducted at source are not ultravires the provisions of the Constitution. - Petition dismissed. - W.P. (C) No. 9410/2014 - - - Dated:- 20-12-2018 - MR. SANJIV KHANNA AND MR. ANUP JAIRAM BHAMBHANI JJ. Appellant Through: Mr. Abhinav, Advocate Respondents Through: Ms. Suparana Srivastava, CGSC with Ms. Sanjna Dua, Adv. for R-1. Mr. Zoheb Hossain, Sr. St. Counsel with Mr. Piyush Goyal, Adv. for R2-3. ANUP JAIRAM BHAMBHANI, J. The petitioner is an Advocate practising in Delhi. By way of the present petition filed under Article 226 of the Constitution of India, the petitioner impugns the constitutional validity of Section 234E of the Income Tax Act, 1961 (the Act ) and also seeks quashing of the fee imposed upon the petitioner as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... co-relation between the imposition of an amount and the provision of a benefit. According to the petitioner, the amount imposed under Section 234E of the Act is in the nature of penalty ; and, in law, penalty cannot be imposed in a mandatory and automatic manner, without exercise of discretion and without being in proportion to the gravity of the omission being penalised. The petitioner also contends that penalty cannot be imposed for commission of a mere procedural and unintended lapse, which does not cause any loss nor imposes any financial burden upon the State exchequer, without considering the bona fides of person upon whom the penalty is levied. 6. The petitioner also delineates in the petition certain factual aspects to detail his grievance, which however, are not essential for deciding the main challenge. Shorn of needless factual detail, in essence and substance, the petitioner s case is that imposition of a fee of ₹ 200/- for every day of failure or delay in filing a statement relating to tax deducted at source by a deductor, is constitutionally untenable, since for imposing a fee it is necessary that the Government renders a service quid pro quo, which is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uilders and Contractors (supra), to say that in the said case the Supreme Court has held that the element of quid pro quo must exist between the payer of the fee and the special services rendered ; and that in the present case, since no such service is made available by the government to the person making deduction of tax at source, the levy is not fee properly so-called. 10. In relying upon the aforesaid decisions however, the petitioner omits to notice that the Supreme Court has observed in Kewal Krishan Puri s case that though an element of quid pro quo for service rendered was necessary for an imposition to be a fee , it may not be possible or even necessary that such element of quid pro quo be established with arithmetic exactitude; and what is required is that, broadly and reasonably, it be established that substantial portion of the amount of fee realised is spent for the special benefit of its payers, with each case to be judged from a reasonable and practical point of view to find the element of quid pro quo. 11. We get our first authoritative insight into the nuanced distinction between tax' and fee from the following words of a Constitution Bench of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quo must exist for a fee in the following words: 31. The traditional view that there must be actual quid pro quo for a fee has undergone a sea change in the subsequent decisions. The distinction between a tax and a fee lies primarily in the fact that a tax is levied as part of a common burden, while a fee is for payment of a specific benefit or privilege although the special advantage is secondary to the primary motive of regulation in public interest if the element of revenue for general purpose of the State predominates, the levy becomes a tax. In regard to fees there is, and must always be, correlation between the fee collected and the service intended to be rendered. In determining whether a levy is a fee, the true test must be whether its primary and essential purpose is to render specific services to a specified area of class; it may be of no consequence that the State may ultimately and indirectly be benefitted by it. The power of any legislature to levy a fee is conditioned by the fact that it must be by and large a quid pro quo for the services rendered. However, co-relationship between the levy and the services rendered (sic or) expected is one of general charac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st Bengaland Anr. reported as (2010) SCC OnLine Cal 2520 a Division Bench of the Calcutta High Court has also taken a concurrent view in addressing the constitutional validity of Section 32 (2) of the West Bengal Value Added Tax Act, 2003 which imposes a late fee for filing of returns. The Division Bench of the Calcutta High Court holds: 8. ... The impugned amendment has introduced late fee in place of penalty which is entirely optional to such a dealer who has failed to furnish return within prescribed period. The dealer is under no compulsion or obligation to furnish return upon payment of late fee . A dealer is still free to choose not to file return after the prescribed period upon payment of late fee and to suffer penal consequences either under section 45(2) or under section 46(1) or under section 46(2) of the Act. 9. There cannot be any room of doubt that the amended sub-section (2) of section 32 of the Act affords a benefit rather special beneficial right to the dealer to submit return upon payment of late fee even after the prescribed period as rightly conomded (sic, contended) by Mr. Basu and found by the learned Tribunal. A dealer may avoid penal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Dy. Commissioner of Income Tax, Ghaziabad (UP) and Anr. reported as 2015 SCC OnLine Kar 7315 also repelled a challenge to the vires of Section 234E of the Act interalia citing the verdict of the Supreme Court in Krishi Upaj Mandi Samiti vs. Orient Paper Industries Ltd.(1995) 1 SCC 655 where, on the issue of the relationship between the levy of fee and services rendered, the Supreme Court has held: 21. (6) There is really no generic difference between tax and fee and the taxing power of the State may manifest itself in three different forms, viz., special assessments, fees and taxes. Whether a cess is tax or fee, would depend upon the facts of each case. If in the guise of 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. In determining whether the levy is a fee, the true test must be whether its primary and essential purpose is to render specific services to a specific area or classes. It is of no consequence that the State may ultimately and indirectly be benefited by it. The amount of the levy must depend upon the extent of the services sought to be rendered and if they are proportion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erabad Hotels Owners Assn. v. Hyderabad Municipal Corpn. 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 by the authority to each individual who obtains the benefit or the service. Quid pro quo in the strict sense was not always a sine qua non for a fee. All that is necessary is that there should be a reasonable relationship between the levy of fee and the services rendered. It was observed that it was not necessary to establish that those who pay the fee must receive direct or special benefit or advantage of the services rendered for which the fee was being paid. It was held that if one who is l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 206C before the expiry of a period of one year from the time prescribed for delivering or causing to be delivered such statement. (4) The provision 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 . 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 so ..... X X X X Extracts X X X X X X X X Extracts X X X X
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