Section 234E fees cannot be levied for periods before June 1, 2015, following favorable precedents

ITAT Chennai held that fees under Section 234E cannot be levied for periods prior to 01.06.2015. Following favorable precedents from Kerala HC in United Metals and Sarala Memorial Hospital cases, and applying the SC principle in Vegetable Products Ltd that ambiguous tax provisions should favor the assessee, the tribunal ruled the TDS officer's fee levy for FY 2013-14 and 2014-15 unsustainable. The assessee's appeal was allowed.

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Issues Involved:
1. Levy of fees under Section 234E for periods prior to 01.06.2015.
2. Condonation of delay in filing the appeal.
3. Validity of the amendment to Section 200A effective from 01.06.2015.

Detailed Analysis:

1. Levy of Fees Under Section 234E for Periods Prior to 01.06.2015:
The primary issue was whether fees under Section 234E could be levied for periods before 01.06.2015. The appellant argued that the amendment to Section 200A, which enabled the levy of such fees, was only introduced with effect from 01.06.2015, making the amendment prospective. The appellant relied on the decision of the Hon'ble Karnataka High Court in Fatehraj Singhvi V/s UOI, which held that no fees would be payable for any period prior to 01.06.2015. Conversely, the revenue relied on the Hon'ble Gujarat High Court's decision in Rajesh Kourani V/s UOI, which upheld the levy of fees even for periods before the amendment date.

Upon careful consideration, the Tribunal found that Section 234E, inserted by the Finance Act 2012 w.e.f. 01/07/2012, envisaged the levy of fees for default in filing TDS statements. However, the amendment to Section 200A, which provided the mechanism for computing and demanding such fees, was only effective from 01.06.2015. The Tribunal noted that the Hon'ble Karnataka High Court had ruled that the amendment to Section 200A was prospective and not retroactive. Thus, the Tribunal concluded that the levy of fees under Section 234E for any period prior to 01.06.2015 was not sustainable.

2. Condonation of Delay in Filing the Appeal:
The appeal was filed with a delay of 303 days, which the appellant attributed to the lockdown period due to the Covid-19 pandemic. The Tribunal noted that the due date for filing the appeal fell within the exclusion period from 15.03.2020 to 28.02.2022. Despite opposition from the Ld. Sr. DR, the Tribunal condoned the delay, agreeing with the appellant's submissions, and admitted the appeal for adjudication on merits.

3. Validity of the Amendment to Section 200A Effective from 01.06.2015:
The Tribunal examined the validity and applicability of the amendment to Section 200A, which included the computation of fees under Section 234E. The appellant argued that the amendment was prospective, meaning fees could not be levied for periods before 01.06.2015. The Tribunal supported this view, citing the Hon'ble Karnataka High Court's decision, which stated that the amendment to Section 200A conferred substantive power and was prospective. The Tribunal emphasized that in the absence of a specific provision for retroactive application, the amendment should be considered prospective.

Conclusion:
The Tribunal ruled in favor of the appellant, holding that the levy of fees under Section 234E for periods prior to 01.06.2015 was not sustainable. The Tribunal directed the concerned authorities to recompute the demand payable by the appellant, excluding the fees levied under Section 234E for the relevant periods. All appeals were allowed accordingly.

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