Section 234E of Income Tax Act - Explained with Case Laws

Author: Dingu

Of late this month we must have received lot of demand from CPC seeking demand for non remittance of Section 234E FEES (not Tax). Well here is something to crunch on about Section 234E.

234E will not apply to cases where TDS payment is made beyond the time limit prescribed for payment of TDS u/s 200(3)

There are two reasons:

Reason 1
Duty of person deducting tax.

200. 9[(1)] 10Any person deducting any sum in accordance with 11 [the foregoing provisions of this Chapter] shall pay within the prescribed time, the sum so deducted to the credit of the Central Government or as the Board directs.

12[(2) Any person being an employer, referred to in sub-section (1A) of section 192 shall pay, within the prescribed time, the tax to the credit of the Central Government or as the Board directs.]

13[(3) Any person deducting any sum on or after the 1st day of April, 2005 in accordance with the foregoing provisions of this Chapter or, as the case may be, any person being an employer referred to in sub-section (1A) of section 192 shall, after paying the tax deducted to the credit of the Central Government within the prescribed time, 14[prepare such statements for such period as may be prescribed] and deliver or cause to be delivered to the prescribed income-tax authority15 or the person authorised by such authority such statement in such form16 and verified in such manner and setting forth such particulars and within such time as may be prescribed.]

Section 200(3) says you have to file your Quarterly return AFTER paying the TDS within the prescribed time.

Well if i pay the TDS amount to the credit of the CG after the due date for payment there is no requirement for me to file my TDS return at all as per section 200(3)

When Charging mechanism fails where is the question of collection FEES Case law of Supreme Court P.C.Srinivasa Chetty

Reason 2

Okay We will harmoniously interpret the section in spirit along with section 201. After payment we have to file the Quarterly return!! i hope we all agree

Here comes the big one.

Section 200(3) says pay and file return else your TDS return is invalid / you cannot file your return. Fine i paid my TDs to government along with interest u/s 201 and filed my return immediately.

Part 1

Then you cannot charge me fees under 234E, since without payment of tax we cannot upload the return. If you are not accepting the return how can you ask fees for not filing Quarterly Return within the due date

LAW CANNOT ASK PEOPLE TO DO WHAT IS NOT POSSIBLE TO DO

Part 2

Let me recall  a splendid decision given a decade ago

Where no books of accounts are not maintained you cannot penalise him for not getting his books of accounts audited Ram Prakash C Puri – 77 ITD 210

Okay to the fun part

Department said you have not paid my tax pay interest (interest is compensatory in nature) We pay from due date for payment to date of payment. Now when i pay interest for late payment how can i / why should i again compensate the Government in the form 234E fees

Moreover 234E starts saying "Without prejudice to the provisions of the Act"   and does not start as 'NOTWITHSTANDING ANYTHING CONTAINED IN THE PROVISIONS OF THIS ACT' 

So Technically the Start of Days for 234E  Fees is from Due date from filling of Quarterly return or Date of TDS remittance which ever is latter..

I am open for discussion to the contrary on it.