LABYRINTH OF LAW

Fees under section 234E for Delay in Filing of TDS Statements before 1st June 2015.

With effect from 01st July 2012 section 234E introduce levy of penaltywhere a person
fails to file the TDS/TCS return on or before the due date prescribed in this regard, then
he shall be liable to pay, by way of fee, a sum of Rs. 200 for every day during which the
failure continues. The amount of late fees shall not exceed the amount of TDS.

After amendment to section 200A of the Act, with effect from 1st June 2015, of during
processing of a TDS Statement, an adjustment can be made in respect of the fee for
default in furnishing of statements under the provisions of section 234E of the Act. Prior
to 1st June 2015, there was no enabling provision for raising a demand in respect of levy
of Fees under section 234E of Income Tax Act.

By examining the correctness of the intimation under section 200A of the Act, one has to
be guided by the limited mandate of Section 200A of the Act, at permitted computation
of amount receivable or payable to deductor after making adjustment.

Charging Provision and Machinery Provision:

The rule of construction of a charging section is that before taxing any person, it
mustbe shown that he falls within the ambit of the charging section by clear words used
inthe section. No one can be taxed by implication. A charging section must beconstrued
strictly. If a person has not been brought within the ambit of the chargingsection by
clear words, he cannot be taxed at all.

Whereas the term machinery provision has not been defined in any act.
‘machinery’ normally refers to plant and machinery. But when the term used in law, it
must, no doubt,be so construed as would effectuate the object and purpose of the
statute and notdefeat it.

Charging provisions which impose the charge to tax and machinery provisions
which provide the machinery for the quantification of the tax andthe levying and
collection of the tax so imposed.And a machinerysectionshould be so construed as to
effectuate the charging section.

Income Tax Appellate Tribunal Amritsar Bench held that fees under section 234E of
Income Tax Act, 1961 for delay in filing of Tax Deducted at Source Statement cannot be
levied before 1st June 2015, since there is no enabling provision under section 200A of
the Act for raising a demand with respect to levy of such fees. The Tribunal held that the
adjustment for levy of fees under section 234E of the Act was beyond the scope of

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 LABYRINTH OF LAW

permissible adjustments under section 200A before the amendment Introduced by the
Finance Act, 2015.

It was observed that intimation under section 200A of the Act for raising a demand or
directing a refund to the tax deductor can be passed within one year from the end of
financial year within which related statement is filed. In above case, time limit for issue
of intimation under section 200A of the act has already elapsed hence demand is not
valid.

However, Honourable Gujarat High Court have given different opinion that
section 200A of the Act does not creates any charge in anymanner. It only provides a
mechanism for processing astatement for tax deduction and the method in whichthe
same would be done.When section 234E has alreadycreated a charge for levying fee that
would thereafternot been necessary to have yet another provisioncreating the same
charge. Viewing section 200A ascreating a new charge would bring about a dichotomy.
The provision in our understanding isa machinery provision and at best provides
foramechanism for processing and computing besides other,fee payable under section
234E for late filing of thestatements.

The decision of Supreme Court in case of Commissionerof

IncomeTax,Bangalore v. B C Srinivasa Settyreported in 1981 (128) ITR 294, to
contend that whena machinery provision is not provided, the levy itselfwould fail.Issue
involved was of chargingcapital gain on transfer of a capital asset.TheSupreme Court
referring to various provisionsconcerning charging and computing capital gainobserved
that none of these provisions suggest thatthey include an asset in the acquisition of
which nocost can be conceived. In such a case, the asset issold and the consideration is
brought to tax, what ischarged is a capital value of the asset and not anyprofit or gain.
This decision therefore would notapply in the present case.

The question which has been raised before us, has been considered by some High
Courts, and it appears that there is conflict of opinion.

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