Sunil Ambwani, C.J:— We have heard learned counsel for the petitioners and learned counsel for the Union of India as well as learned counsel for the Income Tax Department.
2. By this writ petition, the petitioners have prayed for the following reliefs:-
“1. That Hon'ble Court may declare section 234E of the Income Tax Act, 1961 as unconstitutional by issuing necessary directions to the respondents;
2. That alternatively it is prayed that benefit of Circular No. 07/2014 dated March 04, 2014 F. No. 275/27/2013-IT(B) issued by the Respondent No. 2, wherein, Ex-post facto extended the due date for filing TDS/TCS statement for financial year 2012-13 and 2013-14 for Government deductors, may be extended to other deductors also;
3. That necessary direction may kindly be issued to the respondent No. 3 to quash the demand raised in respect of all the petitioners as stated in Annexure 1 to Annexure 7.
4. That any other relief deemed beneficial be also awarded;”
3. The validity of Section 234E was challenged in the Bombay High Court. In Rashmikant Kundalia v. Union of India ((2015) 229 Taxman 596 (Bom)) (Writ Petition No. 771 of 2014) decided on 06.02.2015, the Bombay High Court has upheld the validity of section 234E of the Income Tax Act, 1961, on the ground that the levy of fee of Rs. 200/- per day on the late filing of the TDS returns, which is a duty cast on the person deducting TDS under section 200 of the Income Tax Act, is a compensatory fee, which is not in the nature of penalty. In paragraphs 12 to 15, the Bombay High Court held as follows:-
“12. On a perusal of sub-section (1) of section 234E, it is clear that a fee is sought to be levied inter alia on a person who fails to deliver or cause to be delivered the TDS return/statements within the prescribed time in sub-section (3) of section 200. The fee prescribed is Rs. 200/- for every day during which the failure continues. Sub-section (2) further stipulates that 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.
13. It is not in dispute that as per the existing provisions, a person responsible for deduction of tax (the deductor) is required to furnish periodical quarterly statements containing the details of deduction of tax made during the quarter, by the prescribed due date. Undoubtedly, delay in furnishing of TDS return/statements has a cascading effect. Under the Income Tax Act, there is an obligation on the Income Tax Department to process the income tax returns within the specified period from the date of filing. The Department cannot accurately process the return on whose behalf tax has been deducted (the deductee) until information of such deductions is furnished by the deductor within the prescribed time. The timely processing of returns is the bedrock of an efficient tax administration system. If the income tax returns, especially having refund claims, are not processed in a timely manner, then (i) a delay occurs in the granting of credit of TDS to the person on whose behalf tax is deducted (the deductee) and consequently leads to delay in issuing refunds to the deductee, or raising of infructuous demands against the deductee; (ii) the confidence of a general taxpayer on the tax administration is eroded; (iii) the late payment of refund affects the Government financially as the Government has to pay interest for delay in granting the refunds; and (iv) the delay in receipt of refunds results into a cash flow crunch, especially for business entities.
14. We find that the Legislature took note of the fact that a substantial number of deductors were not furnishing their TDS return/statements within the prescribed time frame which was absolutely essential. This led to an additional work burden upon the Department due to the fault of the deductor by not furnishing the information in time and which he was statutorily bound to furnish. It is in this light, and to compensate for the additional work burden forced upon the Department, that a fee was sought to be levied under section 234E of the Act. Looking at this from this perspective, we are clearly of the view that section 234E of the Act is not punitive in nature but a fee which is a fixed charge for the extra service which the Department has to provide due to the late filing of the TDS statements.
15. As stated earlier, due to late submission of TDS statements means the Department is burdened with extra work which is otherwise not required if the TDS statements were furnished within the prescribed time. This fee is for the payment of the additional burden forced upon the Department. A person deducting the tax (the deductor), is allowed to file his TDS statement beyond the prescribed time provided he pays the fee as prescribed under section 234E of the Act. In other words, the late filing of the TDS return/statements is regularised upon payment of the fee as set out in section 234E. This is nothing but a privilege and a special service to the deductor allowing him to file the TDS return/statements beyond the time prescribed by the Act and/or the Rules. We therefore cannot agree with the argument of the Petitioners that the fee that is sought to be collected under section 234E of the Act is really nothing but a collection in the guise of a tax.”
4. Reliance was also placed on the judgment of the Calcutta High Court in Howrah Tax Payers' Association v. The Government of West Bengal ((2011) 5 CHN 430= 2010 SCC OnLine Cal 2520), in which it was held that there exists quid pro quo in imposing late fee.
5. On the question of filing of appeal, for which there was no provision prior to the amendment made by the Finance Act 2015 with effect from 1-6-2015, by which a provision of appeal has been inserted under section 246A against the order under sub-section (1) of Section 200A or sub-section (1) of Section 206CB, it was held by the Bombay High Court, in the facts of the case prior to the amendment, that simply because there was no remedy of filing appeal, the provisions of Section 234E cannot be said to be onerous. Now, since an appeal has been provided, this argument is no longer available for challenging the vires of Section 234E of the Income Tax Act.
6. Learned counsel for the petitioners submits that the reasons given by the Central Government as well as the Income Tax Department for insertion of Section 200A do not justify the levy of fee, inasmuch as, there is no provision for condonation of delay. There may be variety of circumstances in which the delay may be occasioned for no fault of assessee. He submits that there is hardly any time left in the fourth quarter in filing the TDS deducted by the assessee by challan and in filing of the return by 15th of next month. The fee thus assumes the character of penalty. He also submits that prior to the amendment by the Finance Act 2015 by which sub-section (c) was added to Section 200A(1), there was no provision for computation of the fee for late filing of the TDS returns under section 200A and thus, in the absence of any machinery provisions, the levy of fee under section 200, which imposes a duty on the person deducting tax, was not justified.
7. We have considered the arguments and do not find any good ground to take a view different from the one taken by the Bombay High Court in Rashmikant Kundalia v. Union of India (supra). The unamended Section 200 referred to the levy on the late filing of returns as penalty. It was thereafter termed as fee, which is a compensatory in nature. In Jindal Stainless Ltd. v. State of Haryana ((2006) 152 Taxman 561 (SC), the Constitution Bench of the Supreme Court in paragraph 36 held as follows:-
“36. In the generic sense, tax, toll, subsidies etc. are manifestations of the exercise of the taxing power. The primary purpose of a taxing statute is the collection of revenue. On the other hand, regulation extends to administrative acts which produces regulative effects on trade and commerce. The difficulty arises because taxation is also used as a measure of regulation. There is a working test to decide whether the law impugned is the result of the exercise of regulatory power or whether it is the product of the exercise of the taxing power. If the impugned law seeks to control the conditions under which an activity like trade is to take place then such law is regulatory. Payment for regulation is different from payment for revenue. If the impugned taxing or non-taxing law chooses an activity, say, movement of trade and commerce as the criterion of its operation and if the effect of the operation of such a law is to impede the activity, then the law is a restriction under Article 301. However, if the law enacted is to enforce discipline or conduct under which the trade has to perform or if the payment is for regulation of conditions or incidents of trade or manufacture then the levy is regulatory. This is the way of reconciling the concept of compensatory tax with the scheme of Articles 301, 302 and 304…”
8. The constitutional validity of the statutory provision is not amenable to challenged on the ground that the performance insisted upon by the statutory provision is too onerous or that the statute does not leave sufficient time or does not allow reasonable cause to be considered for violation of the provision. In G.P Singh's Principles of Statutory Interpretation, 9 Edn., 2004, p. 497, referring to a large number of judgments of the Federal Court and the Supreme Court, it was observed that for upholding the constitutionality of a statute, the Court can construe or interpret its general words narrowly or widely. The Court must make every effort to uphold the constitutional validity of a statute, even if that requires giving the statutory provision a strained meaning, or narrower or wider meaning, than what appears on the face of it. It is only when all efforts to do so fail should the Court declare a statute to be unconstitutional.
9. In the present case, the fee was levied under section 200 for late filing of the returns, prior to the amendments made by the Finance Act, 2015 with effect from 1.6.2015 in Sections 200A, 246A and 272A providing for computation and appeal. We do not find that even prior to these amendments the imposition of fee was illegal. We do not in exercise of the power under Article 226 of the Constitution of India find any valid reasons or justification to interfere with the compensatory fees imposed for late filing of the TDS returns on flat rates. The absence of any provision for condonation of delay and the appeal prior to amendments also did not make the imposition of late fees by Section 234E to be ultra vires.
10. The writ petition has no merit and is accordingly dismissed.