Applicability of 272A( 2)(k) of I-T Act to Govt Department
JULY 24, 2017
By Pavan Ved (Adv.) & Apoorva Moonat (C.A.)
Preface :- IT is common practice that TDS authorities usually impose penalty on government department for not filing TDS return u/s 200(3) of IT Act. In this article, an attempt has been made to analyze whether this section is applicable to government Departments.
1. Section 272A is not applicable to Government Departments because it is not a person.
1.1. The section 272A( 2)(k) of IT Act under which penalty is usually levied by tax authorities for non-compliance of provisions of section 200(3) is applicable to any person who has committed violation of section 200(3). It is noteworthy thatgovernment or any of the government department does not fall within the definition of person as defined u/s 2(31) of IT Act. Hence section 272A, as a whole itself ,is not applicable to government or government department or any of the drawing and disbursing officers of the government department.
1.2. No requirement of PAN by government department : At this stage it is important to consider the provisions of section 139A, under which all persons are mandatorily required to obtain PAN. But government departments are not required to obtain PAN; nor any action has ever been taken by income tax department directing them to obtain PAN. This is possiblybecause government department is not a person. If government department is not a person, penalty u/s 272A, which is leviable on Person, cannot be levied simply because government department is not a person.
1.3. Penalty law requires strict interpretation : It is settled law that provisions of penalty should be interpreted strictly and if there is some possibility of interpretation that penalty provisions are not applicable; then interpretation should be against revenue and penalty cannot be levied.
1.4. Government is non-taxable entity: Government and government departmentsare not taxable entities under Constitution of India. The only provision that can be made for government department is with regard to compliance requirements of furnishing information. Government department is also not a person under IT Act u/s 2(31). Hence as per rule of literal interpretation , government department is not a person on whom penalty can be levied u/s 272A.
1.5. No intention of penalizing government department : Even if rule of purposive interpretation is applied, penalty cannot be levied because there cannot be inference of intention of the government to levy penalty on government department for venial breaches.
2. Applicability of sec. 272(A)(2)(K) for violation of sec. 200(3):
2.1. Income tax officers generally levy penalty for violation of this section which is applicable for non-furnishing TDS return after payment of tax to government account. Government Departments are not required to pay the tax. Theymake only an accounting entry. Hence section 200(3) is also not applicable to government department. Hence there is no question of violation of section 200(3) inviting penalty u/s 272A( 2).
2.2. Though sec. 200(2A) was introduced w.e.f . 01.06.2015 providing for obligation on government department to file TDS returnthere is no corresponding amendment in sec. 272A( 2)(k). Hence penalty is still not leviable even todayafter amendment.
2.3. Further, an 'office of government' is liable to file returns of TDS u/s 200 (2A); while u/s 200 (3) mandates a person deducting the tax to file return of TDS. Section 200 (2A) was introduced and made applicable w.e.f . 01/06/2015. This substantiates that prior to this date, there was no provision for government department to file TDS return .
2.4. A reference to provisions of section 204 is also necessary at this stage. U/s 204(iv), government departments have been made ‘person responsible for paying' w.e.f. 1-7-12. Hence prior to that date the government department were not person responsible for paying. Hence there was no offence. Further the term ‘person' as used in section 272Ais different from the term ‘person responsible for paying'. There is no penalty on ‘person responsible for paying' u/s 272A even today. Hence penalty is not leviable .
Authors are, therefore, of the view that there is no provision in the Act which penalizes government department for not furnishing TDS return.
( Pavan Ved is retired Commissioner of Income tax and is Cost Accountant and Company Secretary. Apoorva Moonat is a practicing CA.)
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