Qatalys Software Technologies Private Limited Vs Union of India (Madras High Court)
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.
The Parliament is competent to pass legislation on Taxes in Income under Entry 82 of the List I to the Seventh Schedule. Section 234E 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.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
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 the vires of Section 234 E of the Income Tax Act, 1961.
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 the demand notices raised by the fifth respondent against them under Section 234 E along with Section 220 (2) and 201 (1) (A) of the Income Tax Act, 1961.
3. 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 – (1) 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 (3) of Section 200 or the proviso to sub-Section (3) 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.
(2). The amount of fee referred to in sub-section (1) shall not exceed the amount of tax deductible or collectible, as the case may be.
(3). 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 (3) of Section 200 or the proviso to sub-Section (3) of Section 206 C.
(4). The provisions 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 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.
4. The petitioner contends that Section 234 E of the Income Tax Act is penalty in the shape of a fee. It is submitted that prior to the introduction of Section 234 E, 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. It is submitted that 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 and the fee under Section 234 E 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.
5. The petitioners have given a tabular chart to demonstrate as to how Section 234 E is a penalty disguised as a fee.
