Section 234F Fees is a charge for delay in submitting ITR, not penalty

IN THE HIGH COURT OF JUDICATURE AT MADRAS

O R D E R

The Relevant Text of the Order as follow :

12. It is well settled that if it is a charge for service rendered by the commercial agency and the amount of fee levied is based on the expenses incurred by the Government rendering the fee. Unlike the tax which is compulsory extraction of money, enforceable by law and not in return of any services rendered. The distinction between the tax and the fee is that tax is levied as a part of common burden while fee is payment for a special benefit of privilege. Fee confers some advantage and is a return of consideration for services rendered. The Hon’ble Supreme Court in Jindal Stainless Steel v. State of Haryana {(2006) 145 STC 544 (SC), while laying down the parameters of the judicially evolved concept of ‘compensatory tax’ vis-a-vis Article 301 has explained the difference between a tax, a fee and a compensatory tax in the following manner:

“42. To sum up, the basis of every levy is the controlling factor. In the case of “a tax”, the levy is a part of common burden based on the principle of ability or capacity to pay. In the case of “a fee”, the basis is the special benefit to the payer (individual as such) based on the principle of equivalence. When the tax is imposed as a part of regulation or as a part of regulatory measure, its basis shifts from the concept of “burden” to the concept of measurable/ quantifiable benefit and then it becomes “a compensatory tax” and its payment is then not for revenue but as reimbursement/recompense to the service/facility provider. It is then a tax on recompense, Compensatory tax is by nature hybrid but it is more closer to fees than to tax as both fees and compensatory taxes are based on the principle of equivalence and on the basis of reimbursement/recompense. If the impugned law chooses an activity like trade and commerce as the criterion of its operation and if the effect of the operation of the enactment is to impede trade and commerce then Article 301 is violated”.

Section 234F Fees is a charge for delay in submitting ITR- not penalty

13. In SREENIVASA GENERAL TRADERS v. State of Andhra Pradesh {(1983) 3 SCC – 353, and it came to be held by the Hon’ble Apex Court as under:

“31. The traditional view that there must be actual quid pro quo for a fee has undergone a sea change in the subsequent decisions. The distinction between a tax and a fee lies primarily in the fact that a tax is levied as part of a common burden, while a fee is for payment of a specific benefit or privilege although the special advantage is secondary to the primary motive of regulation in public interest. If the, element of revenue for general purpose of the State predominates, the levy becomes a tax. In regard to fees there is, and must always be, correlation between the fee collected and the service intended to be rendered. In determining whether a levy is a fee, the true test must be whether its primary and essential purpose is to render specific services to a specified area or class; it may be of no consequence that the State may ultimately and indirectly be benefited by it The power of any legislature to levy a fee is conditioned by the fact that it must be “by and large” a quid pro quo for the services rendered. However, cor-relationship between the levy and the services rendered (sic or) expected is one of general character and not of Mathematical exactitude. All that is necessary is that there should be a reasonable “relationship” between levy of the fee, and the services rendered; If authority is needed for this pro position, it is to be found in the several decisions of this Court drawing a distinction between ‘tax’ and ‘fee’. See: The Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt, supra; H.H. Sundhundra Thirtha Swamiar v. Commissioner for Hindu Religious & Charitable Endowments, Mysore, The Hingir-Rampur Coal Co. Ltd. v. State of Orissa; H.H. Shri Swamiji of Shri Admar Mutt v. Commissioner, Hindu Religious & Charitable Endowments Department; Southern Pharmaceuticals & Chemicals, Trichur etc. v. State of Kerala etc., and Municipal Corporation of Delhi v. Mohd. Yasin.

32. There is no generic difference between a tax and a fee. Both are compulsory exactions of money by public authorities. Compulsion lies in the fact that payment is enforceable by law against a person inspite of his unwillingness or want of consent. A levy in the nature of a fee does not cease to be of that character merely because there is an element of compulsion or coerciveness present in it, nor is it a postulate of a fee that it must have direct relation to the actual service rendered by the authority to each individual who obtains the benefit of the service. It is now increasingly realized that merely because the collections for the services rendered or grant of a privilege or licence are taken to the consolidated fund of the State and not separately appropriated towards the expenditure for rendering the service is not by itself decisive. Presumably, the attention of the Court in the Shirur Mutt case was not drawn to Art. 266 of the Constitution. The Constitution nowhere contemplates it to be an essential element of fee that it should be credited to a separate fund and not to the consolidated fund. It is also increasingly realized that the element of quid pro quo in the strict sense is not always a sine qua non for a fee. It is needless to stress that the element of quid pro quo is not necessarily absent in every tax: Constitutional Law of India by H.M. Seervai, Vol. 2, Second Edn., p. 1252, paras 22, 39.”

14. The element of quid pro quo strict senso is not always a sine qua non of a fee. Nonetheless, the fee under Section 234 F is charged for delay in submitting the return of income beyond the prescribed time, which is privilege to allow late filing of the return.

15. The revenue is justified in holding that the object of the provision is thus intended to ensure proper and timely filing of return. The gravamen of the offence is failure to submit the return within a stipulated time. So far as these persons are concerned, they form a class by themselves. Whether a person is richer comparatively than the other has no relevance to this classification. Therefore, the classification of all such defaulters as one class is a reasonable classification and does not offend Article 14 of the Constitution of India.

16. In view of the above, writ petition fails and accordingly, the same is dismissed. No costs. Consequently, the connected Miscellaneous Petition No.21628 of 2018 is closed.

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