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Madras HC upholds Constitutional Validity of provision Prescribing Fees for Delayed Submission of Returns [Read Judgment]
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Madras HC upholds Constitutional Validity of provision Prescribing Fees for Delayed Submission of Returns [Read Judgment]
February 9, 2020 8:08 pm| By : Akshi Narula
Returns Settlement Application – Madras High Court – Taxscan
The Madras High Court by its decision in K. Nirai Mathi Azhagan v Union of India dated 31.01.2020 has upheld the constitutionality of Section 234F of the Income Tax Act, 1961, prescribing the fees for delayed submission of returns.
The challenge to the validity of Section 234F has been made on two grounds. The first one being that the payment is a penalty guided as a fee. Secondly, there is no service provided for by the authorities i.e. there is no quid pro quo on payment of the fee so enlisted.
The Department contended that the timely filing of returns is the bedrock of efficient tax administration system. It has been further submitted that there is an obligation on the Income Tax Department to process an income tax return within the period prescribed after its filing has been done on the part of the taxpayer. The Respondent further submits that the fixed charge i.e. the fee is paid to the Department is a consideration for the service which Department has to provide due to the late filing of return and that the late filing of returns are regulated by levying such fee.
The Bench constituting of Justices A.P. Sahi and S. Prasad held that Fee u/s 234F of the IT Act, 1961 is charged in consideration of services which the Department has rendered including that of correlating returns of various assessments in order to finalise refunds, etc. Further, the fee is a statutory obligation on the Petitioner wherein the revenue compels the assessee to promptitude or otherwise pay an additional fee and hence cannot be termed as arbitrary.
The Court relied upon the decision of Sona Chandi Oal Committee v. the State of Maharashtra to lay that it is not necessary that there must be a mathematical precision between the fee paid and service rendered. All that is necessary is a reasonable relationship between the fee charged and the services rendered.
The Bench also differentiated between tax and fee wherein relying upon the decision of Jindal Stainless Steel v State of Haryana it has been held that while tax is levied as a part of the common burden while fee is a payment for a special benefit or privilege.
To Read the full text of the Judgment CLICK HERE
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