Section 234E Late TDS return fees invalid for periods prior to 01.06.2015

Brief of the case:

• The Hon’ble Karnataka High court in the above cited case held that since before 01.06.2015 section 234E providing for late fee for delay filling of TDS returns was not linked to / not referred under Sec 200A processing of TDS returns. As a result of this the late fee charge was invalid and illegal.
• Therefore, no late fees for delayed filling of TDS returns prior to 01.06.2015 can be levied.
  

Facts of the case:

• The petitioners (assessees) , for the financial year 2012-13 and 2013-14 tax deducted at source was deducted by the respective petitioners and they were also deposited with govt. However, as per the respondent, there was delay in filing of the return/statements with the details of the persons from whom the TDS was deducted including the details of the persons concerned and the transaction etc.

• Hence, the respondent-Department issued demand notices under Section 200A of the Act calling upon the respective petitioners to pay late filing fee under Section 234E of the Act in purported exercise of the power under Section 200A of the Act.
• All the petitioners approached this Court by challenging the constitutional validity of Section 234E of the Act contending that there is no service being rendered to the petitioners/deductors by the respondent-Department and therefore, consequently, the principles of quid pro quo is not available nor the charging of fee by the department is having any nexus to any service to be rendered to the deductor.
• The learned Single Judge after hearing all the respective petitioners and the respondents for the reasons recorded in the impugned order ultimately found that, Section 234E is not suffering from any vices for being declared as ultra vires to the Constitution and he held that the impugned Section 234E of the Act is intra vires to the Constitution and ultimately dismissed all the petitions.
• Aggrieved petitioners are therefore, in appeal with the larger bench of the court.
  

Held by Hon’ble High Court:

• Before analyzing the issue court decoded the legal provisions of the Act. On 1.4.2010, Section 200A was inserted providing for the processing of the TDS statement and the consequent issuance of the intimation to the deductor, the same determined as payable by it or refundable by it.
• On 1.7.2012, Section 234E providing for levying of fee of Rs.200/- per day for each day of default in filing TDS statement was inserted.
• On 1.6.2015, clauses (c) to (f) were inserted to  Section 200A providing that the fee under Section 234E can be computed at the time of processing of the return and the intimation could be issued specifying the same payable by the deductor as fee under Section 234E of the Act.
• Substitution made by clause (c) to (f) of sub-section (1) of Section 200A can be read as having prospective effect and not having retroactive character or effect because unless it is expressly provided or impliedly demonstrated, any provision of statute is to be read as having prospective effect and not retrospective effect.

• As such, the demand under Section 200A for computation and intimation for the payment of fee under Section 234E could not be made in purported exercise of power under Section 200A by the department for the period of the respective assessment year prior to 1.6.2015 as at that point of time there was no reference to Sec 234E under 200A.
• Hence, the demand notices under Section 200A by the department authority for intimation for payment of fee under Section 234E can be said as without any authority of law and the same are quashed and set aside to that extent.
• In result the petitions are allowed.

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