INTERIM RESTRAINING ORDER AGAINST SECTION 194 N TDS ON CASH WITHDRAWAL

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INTERIM RESTRAINING ORDER AGAINST SECTION 194 N TDS ON CASH WITHDRAWAL

11/07/2021

INTERIM RESTRAINING ORDER AGAINST SECTION 194 N TDS ON CASH WITHDRAWAL

Tax Deduction at Source (TDS) under section 194N of the Income Tax Act, 1961 mandated banks, cooperative banks, and post offices to deduct a TDS @ 2% on every withdrawal in excess of one crore rupees during the previous year made by any person from one or more accounts (savings/current ) maintained by him.

This Impugned section was challenged in the Calcutta High court by M/s Apeejay Tea Ltd. Petitioner submits 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.

Petitioner has challenged the impugned legislation on several grounds as appears from the grounds of the writ petition which according to me have some substance and requires consideration for final adjudication by this Court. Petitioner has also 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 Versus Union of India in WP (C ) No. 1658 of 2020 where Hon’ble Court has admitted the writ petition on this issue and has granted interim stay of deduction of tax on source under Section 194N of the Income Tax Act, 1961.

Considering these facts, I am inclined to grant an interim order restraining the respondents authorities concerned from deducting tax on source on the basis of the aforesaid provisions of Section 194N till 30th September, 2021.

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