The Supreme Court on Friday refused to entertain a PIL that sought a declaration that the tax deducted at source (TDS) system under Income Tax Act “is manifestly arbitrary, irrational and against Articles 14, 19 and 21 of the Constitution hence void and inoperative”.
A bench of Chief Justice Sanjiv Khanna and Justice Sanjay Kumar refused to entertain the petition on the ground that there was a certain judgment of the Supreme Court wherein, the provision had already been upheld.
However, the bench said it was not commenting on the merits of the petition and granted liberty to the petitioner to first approach the Delhi High Court on the issue.
The court was dealing with petition filed by advocate Ashwini Kumar Upadhyay who has argued that the TDS system disproportionately burdens assesees with significant administrative expenses i.e. salaries for employees managing TDS compliance professional fees for chartered accountants and tax consultants.
The office space, utilities & operational costs related to compliance can amount to 10 per cent to 20 per cent of the total tax collected by the deductor, for which no compensation is paid. Additionally, non-compliance, even if unintentional, invites heavy penalties, interest, and prosecution under Section 201 and 276B of the Income Tax Act, the PIL had lamented.
The Tax Deducted at Source (TDS) system is presently governed by 39 Sections, 28 Rules and 41 Forms under the Income Tax Act and mandates assessees (the deductors) to collect tax at the time of making payments to payees.