CA. Rajesh Mehta, Indore

Whether Late fee on tds statement U/s 234E or interest U/s 201(1A) or late fee on income tax return U/s 234F or interest U/s 234A, 2134B, 234C be levied by TDS-CPC, Ghaziabad/Income Tax CPC Bengaluru?

Gazette notification issued by govt of india also doesn’t allows TDS CPC –Ghaziabad  to raise any demand u/s.234e or for interest u/s 201(1a) :  Government of India, Ministry of finance, CBDT issued a gazette notification on 15th January 2013 to allow TDS CPC to process TDS Statement.

Late fee u/s 234E or interest u/s 201(1A) cannot be levied because Sec. 200A(2) doesn’t empower to do so either before 1-6-2015 or after 1-6-2015 :- Before 01/06/2015, Section 200A(1) of the act allowed processing of tds statement only to determine tax or interest payable or refund due to the deductor i.e. nowhere provided that tds statement shall be processed for levy of late fees U/s.234E. W.e.f. 1-6-2015 Sec. 200A(1) was amended to allow processing of tds statement to levy late fee U/s 234E also.

Section 200A(2) of the Income Tax Act states that “For the purposes of processing of statements under sub-section (1), the Board may make a scheme for centralised processing of statements of tax deducted at source to expeditiously determine the tax payable by, or the refund due to, the deductor as required under the said sub-section.”

Therefore, as per Sec. 200A(2) even after 01/06/2015 and also before 01/06/2015, TDS-CPC does not have any authority to levy late fee and interest and CBDT cannot delegate powers beyond authority provided under section 200A(2).

Therefore as per sec 200A(2) processing of TDS statement can be done by the TDS CPC Ghaziabad only for the purposes of tax payable or refund due and not for the purpose for levying interest or late fee because the word interest and late fee are  not there in the Sec 200A(2). 

TDS statements are processed by TDS-CPC GHAZIABAD whereas Income tax returns are processed by CPC- Bengaluru.

CPC Bengaluru also has no authority to process the income tax returns for levying late fee u/s 234F or interest U/s 234A,B,C except for tax or refund due, As is evident from Section 143(1A):-  “For the purposes of processing of returns under sub-section (1), the Board may make a scheme for centralised processing of returns with a view to expeditiously determining the tax payable by, or the refund due to, the assessee as required under the said sub-section.”

Tax does not include interest, penalty & late fee:

As per section 2(43) of the Income Tax Act 1961, definition of tax:-

“”tax” in relation to the assessment year commencing on the 1st day of April, 1965, and any subsequent assessment year means income-tax chargeable under the provisions of this Act, and in relation to any other assessment year income-tax and super-tax chargeable under the provisions of this Act prior to the aforesaid date and in relation to the assessment year commencing on the 1st day of April, 2006, and any subsequent assessment year includes the fringe benefit tax payable under section 115WA.

♣ Bombay High Court in the case of CIT vs. Oryx Finance and Investment Pvt. Ltd (Income Tax Appeal No. 01 Of 2015) (1st July 2017) held that, “Tax in arrears would not include the interest”

In Dinesh T. Tailor v. Tax Recovery Officer (2010) 326 ITR 85, the Bombay High Court held that in “Section 179(1), the expression “tax due” and, for that matter the expression “such tax” mean a tax as defined for the purposes of the Act by Section 2(43); “tax due” does not comprehend within its ambit a penalty.”

♣  High Court Of Karnataka in the case of Ebrahim & Ors. Vs. Deputy Commissioner Of Income Tax & Anr. (2011) 332 ITR 0122 held that the component ‘income-tax’ does not include payment of penalty as well as interest.”

♣ High Court Of Delhi in the case of Sanjay Ghai Vs. Assistant Commissioner Of Income Tax & Ors. (2013) 352 ITR 0468 held that “the Court is of the opinion that the structure and construct of the Act has consciously used different words to create constructive liability on third parties, in the case of default in payment of taxes by an assessee. The treatment of the same subject matter by using different terms – in some instances expansive and in others, restrictive, mean that the Court has to adopt a circumspect approach and limit itself to the words used in the given case (in the present case, “tax due” under Section 179) and not “travel outside them on a voyage of discovery” (Magor& St. Mellons RDC v Newport Corporation 1951 (2) All ER 839). Therefore, it is held that the petitioner cannot be made liable for anything more than the tax (defined under Section 2 (43)).”

Therefore, tax does not include interest, penalty, late fee and hence, section 200A(2) and 143(1A) does not authorise TDS-CPC, Ghaziabad or Income tax CPC- Bengaluru to levy late fee or interest.

Disclaimer: The views & opinions expressed herein are the personal views of the author.

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