Madras High Court on invalidity of Section 234E late fee for pre-01.06.2015 TDS processing under Section 200A

Background of the writ petition

The Madras High Court in Sri Rujula International Vs Principal Chief Commissioner of Income Tax (Madras High Court) examined whether late fee under Section 234E of the Income Tax Act 1961 could be levied while processing TDS statements under Section 200A for assessment years prior to 01.06.2015.

Sri Rujula International had filed W.P.No.4307 of 2024 challenging six Demand Intimation Letters dated 28.03.2019 issued by the Deputy Commissioner of Income Tax, Centralized Processing Cell–TDS. These intimations raised fee under Section 234E for delay in filing TDS statements for **assessment years 2012-13 and 2013-14`.

The assessee sought a writ of certiorari to quash these intimations, contending that the levy of late fee under Section 234E through the Section 200A processing mechanism was not legally sustainable for those assessment years.

The central question before the Court was narrow but significant:

Whether, for assessment years prior to 01.06.2015, late fee under Section 234E could be levied while processing TDS statements under Section 200A, when the specific enabling provision Section 200A(1)(c) was not yet part of the statute?

Both sides agreed that this issue had already been examined by the Madras High Court in M/s. True Blue Voice India Private Ltd., and another Vs. the Chief Commissioner of Income Tax – TDS, Chennai and others, 2023 (10) TMI 1141. They submitted that the reasoning in that earlier decision would govern the present case as well.

The High Court therefore proceeded by referring to and applying the principles laid down in M/s. True Blue Voice India Private Ltd., and another Vs. the Chief Commissioner of Income Tax – TDS, Chennai and others, 2023 (10) TMI 1141.

Reference to earlier Madras High Court ruling

Scope of earlier decision

In the earlier judgment in M/s. True Blue Voice India Private Ltd., and another Vs. the Chief Commissioner of Income Tax – TDS, Chennai and others, 2023 (10) TMI 1141, the High Court had already clarified:

  • The validity of Section 234E itself was not in dispute.
  • The sole controversy was:
    • Whether, for the relevant assessment years, the Department could compute and levy the late fee under Section 234E through the processing of TDS statements under Section 200A, in the absence of a specific statutory mechanism.

The Court in that case examined the text of Section 234E, the statutory scheme of Section 200A, and the legislative history of the insertion of Section 200A(1)(c) through the Finance Bill, 2015.

Legislative change: insertion of Section 200A(1)(c)

The earlier judgment noted that:

  • Section 234E was introduced with effect from 01.07.2012 to provide a fee for late furnishing of TDS/TCS statements.
  • Section 200A (processing of TDS statements) existed earlier, but at that time it did not contain any clause enabling the computation of fee under Section 234E during processing.
  • Through the Finance Bill, 2015, clause (c) was inserted into Section 200A(1) with effect from 01.06.2015, providing that:

“(c) the fee, if any, shall be computed in accordance with the provisions of section 234E;”

The judgment extracted and relied on the objects and reasons explaining this amendment.