SARALA MEMORIAL HOSPITAL V. UNION OF INDIA

WP(C)/37775/2018

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The case involves M/s Sarala Memorial Hospital, a partnership firm running a hospital, which was aggrieved by the late filing fees imposed by the Income Tax Department under Section 234E of the Income Tax Act, 1961, for the assessment years 2012-2013 and 2013-2014. The hospital had deducted tax from the remuneration paid to its doctors and remitted it to the Department, complying with Sections 184(J) and 200(1) of the Act. However, the late fees were imposed after the processing of their returns under Section 200A. The hospital contested the imposition of these fees, arguing that the relevant amendment to Section 200A, which included provisions for late fees, was not in effect during the assessment years in question. The court examined the statutory provisions and relevant amendments, ultimately deciding that the amendment was prospective and did not apply to the earlier years.

• Counselvise Citation: [2018] 140 COUNSELVISE.COM (IT) 722292 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 18-12-2018
• Assessment Year: misc
• Other Referred Cases: Fatherraj Singhvi v UOI, Rajesh Kourani v Union of India
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: CHRISTOPHER ABRAHAM
• Assessee Lawyers: D S SREEKUMARAN; T S MAYA THIYADIL
• Keywords: Assessment years; Hospital; Late filing fee; Tax Deduction; TDS
• Section: 234E; 200A; 200(3); 200(1); 184(J)

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE DAMA SESHADRI NAIDU TUESDAY,THE 18TH DAY OF DECEMBER 2018/27TH AGRAHAYANA, 1940 WP(C).No. 37775 of 2018 PETITIONER/S: M/S SARALA MEMORIAL HOSPITAL KILIMANOOR-ATTINGAL ROAD, KILIMANOOR, THIRUVANANTHAPURAM - 695 601, REPRESENTED BY ITS MANAGING PARTNER. BY ADVS. SRI.D.S.SREEKUMARAN SMT.T.S.MAYA (THIYADIL) RESPONDENT/S: 1 UNION OF INDIA REPRESENTED BY ITS SECRETARY, MINISTRY OF FINANCE, DIRECT TAXES DEPARTMENT, NEW DELHI - 110 001. 2 THE INCOME-TAX OFFICER (TDS) AAYAKAR BHAVAN, KOWDIAR, THIRUVANANTHAPURAM, KERALA - 695 003. BY ADV. SRI.CHRISTOPHER ABRAHAM, INCOME TAX DEPARTMENT OTHER PRESENT: SMT. C.G PREETHA, CGC THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 18.12.2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WPC No.37775 of 2018 2 JUDGMENT The petitioner, an assessee, is a partnership firm running a hospital. Under Section 184(J) of the Income Tax Act, 1961 (the Act), the hospital is liable to deduct tax from the amounts it pays to its staff. For the assessment years 2012-2013 and 2013-14, the petitioner deducted tax from the remuneration it paid to the doctors and remitted the tax so deducted to the Department, as per Section 200(1) of the Act. Later, the petitioner submitted the returns or statements with the details, as required under Section 200(3) of the Act. 2. As per Section 200(3) read with Rule 31A of the Income Tax Rules 1952, a deductor must file a return or statement on the TDS. Accordingly, the hospital filed returns in the two assessment years for four quarters: the Exts.P1 to P4. The authorities processed the returns under Section 200A of the Act and demanded from the hospital late filing fee under Section 234E of the Act. 3. Aggrieved, the petitioner has filed this writ petition seeking these reliefs: i) Call for the records leading to issuance of Exhibits P1 t P6 Intimations and quash the same by issuing a Writ of Certiorari; WPC No.37775 of 2018 3 ii) Grant such other reliefs as this Court may deem just and necessary in the facts and circumstances of this case”. Submissions: Petitioner’s: 3. Sri D. S. Sreekumaran, the petitioner's counsel, submits that Section 234E does not affect Section 200(A) of the Act. According to him, only on 01.06.2015 was the statute amended and clause-(c) inserted. He maintains that the amendment is perspective and only from 1.6.2015 has the processing of returns attracted the late fee. In this connection, he has drawn my attention to the Department Circular No.19 of 2015, dated 27.11.2015, and a judgment of the Karnataka High Court in Fatherraj Singhvi v UOI1. Respondents’: 4. Sri Christopher Abraham, the learned Standing Counsel, on the other hand, contends that Section 200A is a charging section enabling the levy under Section 234E, which in fact is a machinery provision. The charging section for levy of late fee in Section 234E was inserted with effect from 1.7.2012. In other words, the assessing officer has the power to levy the late fee from 1.7.2012 onwards. Sri 1 (2016) 289 CTR 0602 WPC No.37775 of 2018 4 Abraham has also strenuously contended that it is too well established to be doubted that all amendments to procedural provisions ought to be retrospective. In this regard, he has relied on Rajesh Kourani v Union of India2. 5. Heard Sri D. S. Sreekumaran, the learned counsel for the petitioner, Sri Christopher Abraham, the learned Standing Counsel for the TDS and Smt.C.G.Preetha, the learned Central Government Counsel, besides perusing the records. Discussion: 6. Indeed, the facts are not in dispute. The petitioner submitted quarterly returns for the assessment years 2012-2013 and 2013-2014. After processing them, the assessing officer issued the Exts.P1 to P4 intimations, requiring the petitioner to pay the late fee. The petitioner has assailed that. To put the issue in perspective, we need to examine the statutory provisions. To begin with, Section 200A before 1.6.2015 stood as follows: 200A. Processing of statements of tax deducted at source. (1) Where a statement of tax deduction at source (or a correction statement) has been made by a person deducting any sum (hereinafter referred to in this section as deductor) under section 200, such statement shall be processed in the 2 (2017) 83 taxmann.com 137 (Gujarat) WPC No.37775 of 2018 5 following manner, namely:- (a) the sums deductible under this Chapter shall be computed after making the following adjustments, namely:- (i) any arithmetical error in the statement; or (ii) an incorrect claim, apparent from any information in the statement, (b) the interest, if any, shall be computed on the basis of the sums deductible as computed in the statement; (c) the sum payable by, or the amount of refund due to, the deductor shall be determined after adjustment of amount computed under clause (b) against any amount paid under section 200 and section 201, and any amount paid otherwise by way of tax or interest; (d) an intimation shall be prepared or generated and sent to the deductor specifying the sum determined to be payable by, or the amount of refund due to him under clause (c); and (e) amount of refund due to the deductor in pursuance of the determination under clause (c) shall be granted to the deductor: (f) the amount of refund due to the deductor in pursuance of the determination under clause (d) shall be granted to the deductor: Provided that no intimation under this sub section shall be sent after the expiry of one year from the end of the financial year in which the statement is filed. Explanation. For the purpose of this sub section, “an incorrect claim apparent from any information in the statement” shall mean a claim, on the basis of an entry, in the statement_ (i) of an item, which is inconsistent with another entry of the same or some other item in such statement; (ii) in respect of rate of deduction of tax at source, where such rate is not in accordance with the provisions of this Act; WPC No.37775 of 2018 6 (2) For the purposes of processing of statements under sub section (1) the Board may make a scheme for centralised processing of statements of tax deducted at source to expeditiously determine the tax payable by, or the refund due to the deductor as required under the said sub section”. 7. Later through Finance Act, 2015 with effect from 1.6.2015, among other things, clause-(c) was added, with other consequential changes. Now, with the amendment, the provision has this addition: “(c) the fee, if any, shall be computed in accordance with the provisions of Section 234E” 8. In fact, Section 234E affects the proceedings. Therefore, it prays to examine that provision as well. And it reads: 234E.- Fee for default in furnishing statements:- (1) Without prejudice to the provisions of the Act, where a person fails to deliver or cause to be delivered a statement within the time prescribed in sub-section (3) of Section 200 or the proviso to sub- section (3) of Section 206C, he shall be liable to pay of fee, a sum of two hundred rupees for every day during which the failure continues (2) 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 (3) The amount of fee referred to in sub-section (1) shall be paid before delivering or causing to be delivered a statement in accordance with sub-section (3) of section 200 or the proviso to sub-section (3) of section 206C.” 9. Interpreting Section 200A and Section 234E, the Karnataka High Court has held in Fatheraj that when the statute confers no WPC No.37775 of 2018 7 express power under section 200A before 01.06.2015 on the authority either to compute and collect any fee under section 234E, the demand for the period before 01.06.2015 could not be sustained. Fatheraj in fact observes: 14. We may now deal with the contentions raised by the learned counsel for the appellants. The first contention for assailing the legality and validity of the intimation under section 200A was that, the provision of section 200A(1)(c), (d) and (f) have come into force only with effect from 1.6.2015 and hence, there was no authority or competence or jurisdiction on the part of the concerned Officer or the Department to compute and determine the fee under section 234E in respect of the assessment year of the earlier period and the return filed for the said respective assessment years namely all assessment years and the returns prior to 1.6.2015. It was submitted that when no express authority was conferred by the statute under section 200A prior to 1.6.2015 for computation of any fee under section 234E nor the determination thereof, the demand or the intimation for the previous period or previous year prior to 1.6.2015 could not have been made. 10. But the Gujarat High Court has taken a contrary stand in Rajesh Kourani. It has held: “In plain terms, Section 200A is a machinery provision providing mechanism for processing a statement of deduction of tax at source and for making adjustments, which are, as noted earlier, arithmetical or prima facie in nature. With effect from 1.6.2015, this provision specifically provides for computing the fee payable under Section 234E. On the other hand, Section 234E is the charging provision creating a charge for levying fee for certain defaults in filing the statements. Under no circumstances a machinery provision can override or overrule a WPC No.37775 of 2018 8 charging provision. Section 200A does not create any charge in any manner. It only provides a mechanism for processing a statement for tax deduction and the method in which the same would be done. When Section 234E has already created a charge for levying fee that would thereafter not have been necessary to have another provision creating the same charge. Viewing Section 200A as creating a new charge would bring about a dichotomy. In plain terms, the provision is a machinery provision and at best provides for a mechanism for processing and computing besides other, fee payable under section 234E for late filing of the statements”. 11. There is a cleavage in judicial opinion. But I am afraid, elaborate as the judgment may be in Rajesh Kourani, it does not seem to have considered the Circular No.19 of 2015, which in para 47.3 clarifies: “47.3 Finance (No.2) Act, 2009 inserted section 200A in the Income-tax Act which provides for processing of TDS statements for determining the amount payable or refundable to the deductor. However, as section 243E was inserted after the insertion of section 200A of the Income-tax Act, the existing provisions of section 200A of the Income Tax Act did not provide for determination of fee payable under Section 234E of the Income Tax Act at the time of processing of TDS statements. Therefore, the provisions of Section 200A of the Income Tax Act has been amended so as to enable computation of fee payable under Section 234E of the Income Tax Act at the time of processing of TDS Statement under Section 200A of the Income Tax Act.” (italics supplied) 12. Further, in para-47.20, the Circular has clearly emphasized that these amendments would take effect only from 1st June 2015. WPC No.37775 of 2018 9 Under those circumstances, I hold that the amendment is prospective and the demand under Exts.P1 to P6 demand notices cannot be sustained. I, accordingly, set aside the Exts.P1 to P6 demand notices. No order on costs. sd/- DAMA SESHADRI NAIDU JUDGE APPENDIX PETITIONER'S/S EXHIBITS: EXHIBIT P1 TRUE COPY OF INTIMATION UNDER SECTION 154 OF THE INCOME TAX ACT, 1961. EXHIBIT P2 TRUE COPY OF INTIMATION UNDER SECTION 154 OF THE INCOME TAX ACT, 1961. EXHIBIT P3 TRUE COPY OF INTIMATION UNDER SECTION 200A OF THE INCOME TAX ACT, 1961. EXHIBIT P4 TRUE COPY OF INTIMATION UNDER SECTION 200A OF THE INCOME TAX ACT, 1961. EXHIBIT P5 TRUE COPY OF INTIMATION UNDER SECTION 200A OF THE INCOME TAX ACT, 1961. EXHIBIT P6 TRUE COPY OF INTIMATION UNDER SECTION 200A OF THE INCOME TAX ACT, 1961. Css/ "