One of the assessee had filed his tds statement for 1st quarter of F.Y. 2012-13 delayed by 260 days, he is in receipt of notice showing late fee of ` 200/- per day i.e. aggregate late fee of ` 52000/- for 260 days, regarding late fee on late filing of TDS statement.
Provisions of Sec. 234E has been made applicable w.e.f. 1st July, 2012. It states that " Amount of late fee shall be paid before delivering a TDS statement", It means that any late fee should have been deposited just at the time of delivering TDS statement and not later than this. The authorized TIN- NSDL centre which accepted the TDS statement also accepted these without late fee, as well as the software utility of the TDS department itself accepted these without late fee.
Once the TDS statement has been accepted without late fee, then such late fee cannot be recovered later on. However this late fee cannot be waived even for any reasonable.
As per provisions of Sec. 234E(4) late fee is applicable for "TDS statement which is to be delivered or caused to delivered for tax deducted at source or tax collected at source, as the case may be, on or after 1st July 2012".
Late fee cannot be recovered for TDS statements which were due for F.Y. 2011-12 as well as TDS statement late fee cannot be recovered for F.Y. 2012-13, if not collected at the time of delivering TDS statement to the department.
On the other hand it is also pertinent to note that the law has not made any person responsible, to deposit late fee, in case of default in depositing late fee alongwith tds statement, which can be inferred from the provisions of Sec. 204 of the act, which states as under:- "Sec. 204 of the act . For the purposes of [the oregoing provisions of this Chapter] and section 285, the expression "person responsible for paying" means—
- in the case of payments of income chargeable under the head "Salaries", other than payments by the Central Government or the Government of a State, the employer himself or, if the employer is a company, the company itself, including the principal officer thereof;
- in the case of payments of income chargeable under the head "Interest on securities", other than payments made by or on behalf of the Central Government or the Government of a State, the local authority, corporation or company, including the principal officer thereof;
[(iia) in the case of any sum payable to a non-resident Indian, being any sum representing consideration for the transfer by him of any foreign exchange asset, which is not a short-term capital asset, the [authorised person] responsible for remitting such sum to the non-resident Indian or for crediting such sum to his Non-resident (External) Account maintained in accordance with [the Foreign Exchange Management Act, 1999 (42 of 1999)], and any rules made thereunder;]
- [in the case of credit, or, as the case may be, payment] of any other sum chargeable under the provisions of this Act, the payer himself, or, if the payer is a company, the company itself including the principal officer thereof;
- in the case of credit, or as the case may be, payment of any sum chargeable under the provisions of this Act made by or on behalf of the Central Government or the Government of a State, the drawing and disbursing officer or any other person, by whatever name called, responsible for crediting, or as the case may be, paying such sum.]"
The section 204 specifically says that "for the purposes of Sec. 190 to Sec. 203 and for Sec. 285 of the act the following persons would be responsible" , so it is clear that for the purpose of Sec. 234E none of the person has been made responsible, therefore if any late fee is due and not deposited alongwith the tds statement none can be held responsible to deposit it.Demand of late fee cannot be raised also by way of processing of TDS statement, because provisions of Sec. 200A of the act does not cover default in payment of late fee, except any arithmetical error, or incorrect claim, or default in payment of interest, any tds payable or refundable etc.In view of the above it is my opinion that late fee cannot be recovered later on by way of any notice, neither notice of demand U/s 156 can be issued for this. Any querries and suggestions are welcome on this issue.
IT : Amendments made to section 245D(4A)(i) and section 245HA(1)(iv) providing for abatement of proceedings were constitutionally valid
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[2013] 38 taxmann.com 393 (Allahabad)
HIGH COURT OF ALLAHABAD
Jai Guru Jewelers
v.
Union of India*
SUNIL AMBWANI AND SURYA PRAKASH KESARWANI, JJ.
WRIT TAX NOS. 1070, 1075, 1190 OF 2007 & 778, 785, 806
TO 808, 842 TO 846, 984, 985, 997, 1003, 1004,
1019, 1035, 1037, 1038, 1040,1113, 1114, 1166, 1172
TO 1174, 1181, 1182, 2099, 2100, & 2101 OF 2008
TO 808, 842 TO 846, 984, 985, 997, 1003, 1004,
1019, 1035, 1037, 1038, 1040,1113, 1114, 1166, 1172
TO 1174, 1181, 1182, 2099, 2100, & 2101 OF 2008
JULY 16, 2013
Section 245D, read with section 245HA, of the Income-tax Act, 1961 - Settlement Commission - Procedure on application under section 245C [Constitutional validity] - Amendments were made by Finance Act, 2007 to Chapter XIX-A to effect that all applications for settlement filed prior to amendment shall abate on 1-4-2008 vide sections 245D(4A) and 245HA - Validity of said amendment was challenged as being discriminatory - Bombay High Court in similar matter in Star Television News Ltd. v. UOI [2009] 317 ITR 66/184 Taxman 400, held that to save these sections from vice of discrimination an applicant could not be punished for inability or failure of Settlement Commission to dispose of its application within specified period; where such delay in disposal was not attributable to applicant under section 245D(4A) and consequently, where applicants had prevented Settlement Commission from fulfilling its statutory mandatory duty under section 245D (4A), such applications would abate as per section 245HA - Whether in view of said decision, constitutional validity of section 245D(4A) and section 245HA was protected from vice of discrimination - Held, yes [Paras 9 and 10] [In favour of assessee]
CASE REVIEW
Star Television News Ltd. v. Union of India [2009] 317 ITR 66/184 Taxman 400 (Bom.) (para 10) followed.
CASES REFERRED TO
Star Television News Ltd. v. Union of India [2009] 317 ITR 66/184 Taxman 400 (Bom.) (para 5).
S.D. Singh for the Petitioner. Bharatji Agarwal for the Respondent.
ORDER
1. We have heard Shri S.D. Singh, Shri S.K. Garg, Shri Ashish Bansal, Shri R.R. Agarwal and Shri Suyash Agarwal, learned counsels appearing for the petitioners. Shri Shambhu Chopra and Shri R.K. Upadhyay appear for the Income Tax department.
2. In all these writ petitions the petitioners have prayed for directions to declare the amendments made by the Finance Act, 2007 in Chapter XIX-A of the Income Tax Act, 1961 (by which it has been provided that the applications for settlement filed prior to the amendment shall abate on 1.4.2008, provided under Section 245-D (4A) and 245-HA of the amending Act) ultra vires the Constitution of India and to direct the Income Tax Settlement Commission, New Delhi to decide the applications on merits on or before 31.3.2008. A further prayer is made to direct the respondents to exclude all materials on the file of the Settlement Commission arising from the application for settlement filed by the petitioner from any proceedings initiated/continued against the petitioners by any Income Tax Authority.
3. By interim orders passed in all these writ petitions the provision for abatement of proceeding relating to the petitioners pending before the Settlement Commissioner was stayed with a clarification that the pendency of the writ petition will not come in the way of the Settlement Commission in disposing the matter before it in accordance with law.
4. In some of the cases, which were connected to this batch of the writ petitions, the Settlement Commission had passed orders on the applications in favour of such petitioners, and thus the petitioners did not press those writ petitions, which were dismissed on 8.7.2013 and today i.e. 16.7.2013, without entering into the merits of their claims.
5. The validity of the amendments made by the Finance Act, 2007 to Chapter XIX-A of the Income Tax Act, by which it was provided that all applications for settlement filed prior to the amendment shall abate on 1.4.2008 vide Sections 245-D(4A) and 245-HA of the amending Act, was challenged in various High Courts. The Bombay High Court, by its judgment dated August 07,2009 in Star Television News Ltd. v. Union of India[2009] 317 ITR 66/184 Taxman 400,considered the matter at length and instead of striking down the provisions of Section 245-D (4A) and 245-HA, as amended by Finance Act, 2007, preferred in the circumstances of the case to read them down and to save them from the vice of arbitrariness.
6. It was held by the Division Bench of the Bombay High Court, that where the plain literal interpretation of a statutory provision produces a discriminatory or incongruous or manifestly absurd or unjust result which could never have been intended by the legislature, the Court may modify the language used by the legislature or even do some violence to it, so as to achieve the obvious intention of the legislature and produce a rational construction. An interpretation leading to an unjust, inequitable, harsh and absurd result must be rejected. It further held that since the purported objective of the amendments introduced in Chapter XIX-A by the 2007 Act is to streamline the proceedings before the Settlement Commission and to ensure expeditious disposal of pending cases, the amendments cannot be construed so as to punish an applicant for the inability or failure of the Settlement Commission to dispose of its application within the period specified in section 245D (4A), where such delay in disposal is not attributable to the applicant. The time limit for disposal of an application under Section 245D(4A) (I) will have to be read as "may" to the extent that it is not on account of the fault of the applicant. Consequently, Section 245HA(1)(iv) must apply only where the applicants have, by some willful act or omission, prevented the Settlement commission from fulfilling its statutory mandatory duty under Section 245D(4A), and only such applications will abate. A harmonious interpretation of sections 245D(4A) and 245HA(1)(iv) would remove the vice of arbitrariness and save the provisions from being struck down as unconstitutional.
7. The operative portion of the judgment of the Bombay High Court is quoted for benefit as follows:—
'By reading the words "any other application made under Section 245C" in section 245HA(1)(iv) as "any other application made under section 245C, where due to reasons attributable to the assessee" this Court would avoid rendering any part of either section 245D(4A)(i) or section 245HA(1)(iv) otiose, meaningless or redundant. The two provisions, read in such a harmonious manner, would mean that the Settlement Commission must fulfill its mandatory statutory duty in disposing of such applications as are referred to in section 245D(4A)(i) by the date specified therein except where prevented from doing so due to any reason attributable on the part of the applicant, and that an application in respect of which the Settlement Commission has been prevented from fulfilling the aforesaid mandatory statutory duty due to any reasons attributable on the part of the applicant shall abate on the specified date under section 245HA(1)(iv). In this manner both section 245D(4A)(i) and section 245HA(1)(iv) will have applicability, meaning and effect. We may also clarify that the expression "reasons attributable" should be reasonably construed. While so dealing, the Settlement Commission shall also to consider whether in the petition before this court the petitioner had averred that the proceedings were delayed not on account of any reason attributable to him, and whether the State had denied the same, if there be no denial then to reconsider that circumstances in favour of the petitioner.
From the above discussion having arrived at a conclusion that fixing the cut off date as March 31, 2008, was arbitrary the provisions of section 245HA(1)(iv) to that extent will be also arbitrary. We have also held that it is possible to read down the provisions of section 245HA(1)(iv) in the manner set out earlier. This recourse has been taken in order to avoid holding the provisions as unconstitutional. Having so read, we would have to read section 245HA(1)(iv) to mean that in the event the application could not be disposed of for any reasons attributable on the part of the applicant who has made an application under section 245C. Consequently, only such proceedings would abate under section 245HA(1)(iv). Considering the above, the Settlement Commission to consider whether the proceedings had been delayed on account of any reasons attributable on the part of the applicant. It it comes to the conclusion that it was not so, then to proceed with the application as if not abated. Respondent no.1 if desirous of early disposal of the pending applications, to consider the appointment of more Benches of the Settlement Commission, more so at the Benches where there is heavy pendency like Delhi and Mumbai.
Rules made absolute accordingly. There shall be no order as to costs.'
8. The High Court of Jharkhand at Ranchi has relied on the reasoning; followed the conclusions drawn in the judgment of Bombay High Court and has preferred to read down the offending provisions instead of declaring them unconstitutional. The judgment was delivered in Writ Petition (T) No.1623 of 2008 (Md. Sanaul Haque v. Union of India and others) and other connected writ petitions by Division Bench on 21.3.2012.
9. Following the judgment of the Bombay High Court, with which we respectfully agree, and against which the department could not cite any judgment of any other High Court of Apex Court, which may have taken a different view and on the same reasoning we hold that by reading down the provisions of Section 245D(4A)(i) and Section 245HA(1)(iv) the constitutional validity of the amendments providing abatement of proceedings may be saved and protected from the vice of discrimination, and issue same directions to find out, if the delay is attributable to the applicants before making final order.
10. We further direct that in carrying out the directions of this Court in the pending applications, the Settlement Commission will, in arriving at a finding on the question whether the delay in disposal is attributable to the applicants, follow the same guidelines, which have been set out in the judgment in Star Television News Ltd. (supra).
11. All the writ petitions are accordingly disposed of.
IT : Where expenditure was laid out for purpose which constituted an offence or prohibited by law, same could not be treated as expenditure for which deduction could be claimed
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[2013] 39 taxmann.com 17 (Kerala)
HIGH COURT OF KERALA
Muthoot Finance Corporation
v.
Commissioner of Income-tax*
K.M. JOSEPH AND K. HARILAL, JJ.
IT APPEAL NO. 42 OF 2004
SEPTEMBER 7, 2012
Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of [Illegal payments] - Assessment year 1996-97 - Assessee was a financial enterprise engaged in accepting fixed deposits as loans for which it paid interest - Assessing Officer disallowed interest paid by assessee in excess of maximum permissible limit as prescribed under Kerala Money Lenders Act - Whether where expenditure was laid out for purpose which constitutes an offence or prohibited by law, same could not be treated as expenditure for which deduction could be claimed - Held, yes - Whether in instant case, since amount of disallowance represented money paid in excess of limit which was prescribed under Kerala Money lenders Act, expenditure was in teeth of Explanation to section 37(1) and was not to be allowed - Held, yes [Para 9] [In favour of revenue]
FACTS
| ■ | The assessee was a financial enterprise engaged in accepting fixed deposits as loans for which it pays interest. | |
| ■ | The Assessing Officer disallowed the interest paid by the assessee to the depositors which represents the amount paid in excess of legal limit of 14 per cent as prescribed under the Kerala Money Lenders Act. | |
| ■ | On appeal, the Commissioner (Appeals) as well as the Tribunal affirmed the addition made by the Assessing Officer. | |
| ■ | On further appeal: |
HELD
| ■ | By virtue of the Finance Act, 1998, Explanation stands inserted in section 37 with effect from 1-4-1960. This means that a deduction could not be claimed in respect of the year 1996-97, if it is an expenditure incurred by the assessee for a purpose which is an offence or it is prohibited by law. A like provision was not present in section 10 of the Income-tax Act 1922. Therefore, the decision of the Apex Court relied on by the assessee turned on facts present in the said case. The Apex Court had no occasion to consider a provision like section 37 with the Explanation. As far as theExplanation is concerned as stated above if expenditure is laid out for a purpose which constitutes an offence or if it is prohibited by law, it cannot be treated as an expenditure for which deduction can be claimed. [Para 8] | |
| ■ | The right of the assessee to claim deduction will depend upon the express provisions of the Act. The terms of the explanation are clear. In the facts of the case, even though the purpose for which the amount was expended may not lead to the commission of an offence, the expenditure by way of payment of interest in excess of the limit imposed under the Kerala Money Lenders Act is prohibited. The grant of interest at the rate an excess of 14 per cent is prohibited. The amount of deduction claimed by the appellant represents money paid as interest in excess of 14 per cent. Therefore, the expenditure is in the teeth of the explanation to section 37 which is the legal provision applicable. Therefore, there is no merit in the appeal and the questions are answered against the appellant. [Para 9] |
CASE REVIEW
CIT v. Piara Singh [1980] 124 ITR 40 (SC) (para 8) distinguished.
K.R. Sudhakaran Pillai for the Appellant. Jose Joseph for the Respondent.
JUDGMENT
K.M. Joseph, J. - This appeal is preferred by the assessee questioning the order passed by the Tribunal. The appellant is a financial enterprise engaged in accepting fixed deposits as loans for which it pays interest. The appeal relates to the year 1996-97.
2. The assessing officer completed the assessment by enhancing the returned income to Rs.3,93,060/-as against the declared amount of Rs.2,78,070/-. The addition was made in a sum of Rs.1,14,983/- which was claimed as interest paid by the appellant to the depositors. It was disallowed on the basis that the maximum rate of interest payable under the Kerala Money Lenders Act is 14%.The amount which was disallowed represents the amount paid in excess of the legal limit. The appeal carried by the appellant was unsuccessful in regard to the amount disallowed on account of the excess payment of interest. The Tribunal has affirmed the said view. Accordingly the appellant is before us.
3. We heard the learned counsel for the appellant and the learned counsel for the Revenue.
4. The learned counsel for the appellant would submit that the Tribunal acted illegally in not giving credit to the amount which was paid to the depositors of the appellant. He would rely on the judgment of the Apex Court reported in CIT v. Piara Singh [1980] 124 ITR 40. That was a case which arose under the Income-tax Act, 1922 and under Section 10 thereof. The facts have been set out as follows :
"The respondent, who was carrying on smuggling activity, was apprehended by the Indian police, while crossing the border into Pakistan, and a sum of Rs.65,000/- in currency notes was recovered from his person. On interrogation he stated that he was taking the currency notes to Pakistan to purchase gold there and smuggle it into India. The customs authorities confiscated the currency notes. The income-tax authorities found that the assessee was carrying on the business of smuggling and that he was liable to income-tax on income from that business and such income was assessed to tax. The question was whether the assessee was entitled to deduction under S.10 of the Indian I.T. Act, 1922, of the loss of Rs.65,000/-, arising by the confiscation of the currency notes".
The court held as follows:
"The carriage of the currency notes across the border was an essential part of the smuggling operation and detection by the customs authorities and consequent confiscation was a necessary incident and constituted a normal feature of such an operation. The confiscation of the currency notes was a loss occasioned in pursuing the business of smuggling: it was a loss in much the same way as if the currency notes had been stolen or dropped on the way while carrying on the business. It was a loss which sprang directly from the carrying on of the business and was incidental to it and its deduction had to be allowed under S.10."
5. On the strength of the said judgment, the learned counsel for the appellant would contend that even where the income was found to be illegal, it was held that loss could be claimed as a deduction. If the income is tainted and he is forced to pay the tax, he poses the question as to how it could be held that the amount which is paid in excess of the legal limit under the Money Lenders Act should not be allowed to be deducted from the income. No doubt, he pointed out Section 37 of the Income Tax Act, 1961 which has been relied on by the Tribunal and also by the authorities. Section 37 in so far as it is material reads as follows:
'37. General — (1) Any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head "Profits and gains of business or profession".
Explanation — For the removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure.'
6. He would also submit that the payment of excess interest cannot be treated as an offence in an attempt to get over the taboo against deducting the higher interest paid. He also drew support from the judgment of the Apex Court referred to above to get over the second aspect of the explanation namely any expenditure which is prohibited by law cannot be claimed.
7. Per contra, the learned standing counsel for the Revenue would point out that the Explanation to Section 37 was inserted by the Finance Act No.2/1998 with effect from 01/04/1960. He would point out that there was no similar explanation in regard to Section 10 of the Income-Tax Act, 1922.
He would further contend that this is not a case where the business conducted by the appellant could be said to be illegal as such. What is involved is applying the terms of the explanation to the facts of the case which is what has been done by the Tribunal.
8. We would think that there is no merit in the appeal. The assessment year in question is 1996-97. Therefore, the assessment is to be made under the Income-tax Act, 1961. By virtue of the Finance Act, 1998, Explanation stands inserted in Section 37 with effect from 01/04/1960. This means that a deduction could not be claimed in respect of the year 1996-97, if it is an expenditure incurred by the assessee for a purpose which is an offence or it is prohibited by law. A like provision was not present in Section 10 of the Income Tax Act 1922. Therefore, the decision of the Apex Court relied on by the learned counsel for the appellant turned on facts present in the said case. The Apex Court had no occasion to consider a provision like Section 37 with the Explanation. As far as the Explanation is concerned as stated above if expenditure is laid out for a purpose which constitutes an offence or if it is prohibited by law, it cannot be treated as an expenditure for which deduction can be claimed.
9. The right of the assessee to claim deduction will depend upon the express provisions of the Act. The terms of the explanation are clear. In the facts of the case, even though the purpose for which the amount was expended may not lead to the commission of an offence, the expenditure by way of payment of interest in excess of the limit imposed under the Kerala Money Lenders Act is prohibited. The grant of interest at the rate an excess of 14% is prohibited. The amount of deduction claimed by the appellant represents money paid as interest in excess of 14%. Therefore, the expenditure is in the teeth of the explanation to Section 37 which is the legal provision applicable. We see, therefore, no merit in the appeal and the questions are answered against the appellant.
Regards,
Pawan Singla
BA (Hon's), LLB
__._,_.___
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