New Delhi, July 12 (ILNS): The Calcutta High Court on July 8, restrained the Income Tax Department from collecting Tax Deduction at Source (TDS) under section 194N of the Income Tax Act, 1961, till September 30, 2021.
Justice Md. Nizamuddin observed that petitioner has challenged the legislation on several grounds as appears from the grounds of the writ petition which have some substance and requires consideration for final adjudication by the high court.
The petitioners Apeejay Tea Ltd. has challenged the constitutional validity and legality of section 194N of the Income Tax Act, 1961 which mandates the deduction of tax at source at the rate of 2% on cash withdrawals from, a banking company exceeding Rs. 1 crore in a financial year and the said Section was inserted by the Finance Act, 2019 and became effective from September 1, 2019 and has been substituted by the Finance Act, 2020.
The Court while granting an interim order restrained the authorities from deducting tax on source on the basis of the provisions of Section 194N till September 30, 2021. The Court directed the Respondents authorities to file affidavit-in opposition within four weeks from date. Petitioner to file reply thereto, if any, within two weeks thereafter. The court posted the matter for final hearing after eight weeks.”
Petitioner submitted that section 194N of the said Act is beyond the legislative competence of the Parliament and Entry 82 of List I of Schedule VII to the constitution allows the parliament to enact laws for imposition, collection and levy of tax on “income” and the parliament cannot legislate a provision stipulating the deduction of tax at source from an amount which is admittedly not income and such legislation would be beyond the legislative competence of the Parliament under Entry 82 of List I of Schedule VII of the Constitution./ILNS/SNG