TMI Blog2020 (2) TMI 425X X X X Extracts X X X X X X X X Extracts X X X X ..... o cross verify the same and complete the assessment within the period of limitation and in order to ensure that such acts of an assessee in discharging his entire tax liability bear fruits, a regulatory mechanism in the form of Section 234 F has been inserted in the statute book and the same cannot be termed as illogical or harsh. Section 234F 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. 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. The element of quid pro quo strict senso is not always a sine qua non of a fee. Nonetheless, the fee under Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioner, relies on a judgment of the Hon'ble Supreme Court in KUNNATHAT THATEHUNNI MOOPIL NAIR, ETC., Vs. STATE OF KERALA AND ANOTHER {(1961) 3 SCR 77}, more particularly, paragraph 8, and the same reads as under:- It is common ground that the tax, assuming that the Act is really a taxing statute and not a confiscatory measure, as contended on behalf of the petitioners, has no reference to income, either actual or potential, from the property sought to be taxed. Hence, it may be rightly remarked that the Act obliges every person who holds lands to pay the tax at the flat rate prescribed, whether or not he makes any income out of the property, or whether or not the property is capable of yielding any income. The Act, in terms, claims to be a general revenue settlement of the State (Section 3). Ordinarily, a tax on land or land revenue is assessed on the actual or the potential productivity of the land sought to be taxed. In other words, the tax has reference to the income actually made, or which could have been made, with due diligence, and, therefore, is levied with due regard to the incidence of the taxation. Under the Act in question, we shall take a hypothetical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of the persons or things for the purpose of applying its provisions but may leave it to the discretion of the Government to select and classify persons or things to whom its provisions are to apply. In determining the question of the validity or otherwise of such a statute the Court will not strike down the law out of hand only because no classification appears on its face or because a discretion is given to the Government to make the selection or classification but will go on to examine and ascertain if the statute has laid down any principle or policy for the guidance of the exercise of discretion by the Government in the matter of the selection or classification. After such scrutiny, the Court will strike down the statute if it does not lay down any principle or policy for guiding the exercise of discretion by the Government in the matter of selection or classification, on the ground that the statute provides for the delegation of arbitrary and uncontrolled power to the Government so as to enable it to discriminate between persons or things similarly situate and that therefore, the discrimination is inherent in the statute itself. (p.299 of the report) The observati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in the Himalayas after the rendering of the earlier judgments as there was a sea change in the judicial thinking as to the difference between a tax and a fee since then. Placing reliance on the following judgments of this Court in the 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 U.P. [(1997) 2 SCC 715] , Research Foundation for Science, Technology Ecology v. Ministry of Agriculture [(1999) 1 SCC 655] and Secunderabad 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 chara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regulatory mechanism in the form of Section 234 F has been inserted in the statute book and the same cannot be termed as illogical or harsh. 10. 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 will violate Article 246 (1) of the Constitution, or the law violates some specific provision of the Constitution (other than the directive principles). But before declaring the statute to be unconstitutional, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s manifestly arbitrary for it to be struck down. 12. 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. The Hon'ble Supreme Court in Jindal Stainless Steel v. State of Haryana {(2006) 145 STC 544 (SC) , while laying down the parameters of the judicially evolved concept of compensatory tax vis-a-vis Article 301 has explained the difference between a tax, a fee and a compensatory tax in the following manner: 42. To sum up, the basis of every levy is the controlling factor. In the case of a tax , the levy is a part of common burden based on the principle of ability or capacity to pay. In the case of a fee , the basis is the special benefit to the payer (individual as such) based on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stinction 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 v. Commissioner, Hindu Religious Charitable Endowments Department ; Southern Pharmaceuticals Chemicals, Trichur etc. v. State of Kerala etc. , and Municipal Corporation of Delhi 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 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 each individual who obtains the benefit of the service. It is now increasingly realized that merely because the coll ..... X X X X Extracts X X X X X X X X Extracts X X X X
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