INCOME TAX ACT, 1961

Section 234E Article 126

Fee under Section 234E - Delay in filing of TDS statements - Leviability - Constitutional validity

Assessee by way of writ petition challenged the vires of section 234E.Assessee submitted that fee could be levied only for the service rendered as a compensatory fee or for any privilege that conferred i.e. regulatory fee. Section 234E which levies a fee on delayed payment of TDS statement is neither compensatory fee nor a regulatory fee. Also there is no relationship between levy of fee and service that is sought to be rendered on the contrary since no service has been rendered, fee should not be leviable at all. Further, with an existing penalty for delay in filing TDS statement under section 271H, section 234E being a mere verbatim transformation of an earlier existing penalty under section 271A(2)(k) under a different nomenclature of Fee and thus a penalty disguised as a Fee making it in effect a double penalty (in addition to section 271H) for the same default, was in violation of article 20(2) of the Constitution Held: Section 234E is not a penalty provision. Penalty is levied under section 271H and is not automatic. Penalty is levied only when tax is deducted at source along with interest is not deposited and statement is not filed within one year. If these two conditions are satisfied, then penalty is not leviable. On the other hand, section 234E is only a late fee at the rate of Rs. 200 per day meant to ensure that assessee files TDS statement in time, so that Department can clear returns of persons connected with assesse i.e.from whom tax has been deducted at source without any delay and accurately with increasing or overloading burden of department.Further describing the levy under section 234E as a 'fee' cannot be the sole basis for judging the true nature or validity of levy. Section 234E affords a person deducting tax at source the evident benefit of relaxation of timelines for furnishing a statement of tax so deducted. The fee imposed under section 234E is for all intents and purposes a 'late fee' payable for accepting TDS statement/return at a belated point in time. Accordingly, section 234E is not violative of any of the provisions of Income Tax Act or Constitution of India.

REFERRED :

FAVOUR : Against the assesse

A.Y. :

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