The Supreme Court on Friday dismissed a Public Interest Litigation (PIL) seeking to declare the Tax Deducted at Source (TDS) system as "manifestly arbitrary, irrational, and violative of fundamental rights." The PIL, filed by advocate Ashwini Upadhyay, contended that the current TDS framework infringes on constitutional rights, including the right to equality.
SC Labels Plea 'Badly Drafted,' Suggests Delhi High Court Route
While rejecting the petition, Chief Justice of India (CJI) Sanjiv Khanna remarked, "Sorry, we will not entertain it. It is very badly drafted. However, you can move the Delhi High Court." The bench further noted that the TDS mechanism is a widely accepted practice across several countries and plays a crucial role in tax compliance.
Advocate Challenges TDS as 'Arbitrary and Irrational'
The petitioner argued that the TDS system, mandated under the Income Tax Act, unfairly burdens taxpayers by deducting taxes at the source of income generation. The plea claimed this mechanism violates various constitutional provisions and called for a complete re-evaluation of the TDS framework. The petition also named the Central Government, Ministry of Law and Justice, Law Commission of India, and NITI Aayog as respondents.
What is the TDS System?
Tax Deducted at Source (TDS) is a critical component of India’s tax collection mechanism. It mandates the payer (or deductor) to deduct a specified percentage of tax before making payments to the recipient (or deductee). This deducted tax is deposited with the government and is adjusted against the recipient's tax liability.
The objective of the TDS system is to ensure a steady flow of revenue to the government and reduce tax evasion by collecting taxes at the point of income generation. Despite its intent, the petitioner alleged that the current system is arbitrary and lacks adequate safeguards, warranting judicial intervention.
Legal Options for Challengers
With the Supreme Court declining to entertain the PIL, the petitioner now has the option to approach the Delhi High Court for relief. Whether this legal battle gains traction in the lower courts remains to be seen, as the TDS mechanism has been a cornerstone of India's tax administration.
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