Calcutta High Court grants interim stay of deduction of tax under section 194N of Income Tax Act
|
Case Details: |
Appejay Tea Limited vs. Union of India & Ors. |
|
Appeal No.: |
WPA No. 10856 of 2021 |
|
Order pronounced by: |
Calcutta High Court |
|
Date of Order: |
08-07-2021 |
Brief Facts:
- Section 194N of the Income Tax Act, 1961 mandates deduction of tax at source @ 2% or 5% on cash withdrawals from bank if such cash withdrawals exceed Rs. 20 lakhs/ Rs. 1 crore.
- The appellant challenged the constitutional validity of section 194N. The petitioner submitted that Section 194N of the Act is beyond the legislative competence of the Parliament.
- Entry 82 of List I of Schedule VII to the Constitution allows the Parliament to enact laws for 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.
- Such legislation would be beyond the legislative competence of the Parliament under Entry 82 of List I of Schedule VII of the Constitution.
- The petitioner relied on several unreported decisions of the Hon’ble Kerala High Court involving the same issue and one of which is order dated 13th August 2020 passed in Kanan Devan Hills Plantations Company Pvt. Ltd. vs. Union of India in WP (C) No. 1658 of 2020 where the Hon’ble High Court has admitted the writ petition on this issue and granted interim stay of deduction of tax on source under section 194N of the Income Tax Act.
High Court Order:
Considering these facts, I am inclined to grant an interim order restraining the respondent authorities concerned from deducting tax on source on the basis of aforesaid provisions of section 194N till 30th September, 2021
Matter to appear for final hearing after eight weeks.
