New Delhi: On Friday, the Supreme Court of India rejected a Public Interest Litigation (PIL) that sought to declare the Tax Deducted at Source (TDS) system as “manifestly arbitrary, irrational, and violative of various fundamental rights.” The petition, filed by advocate Ashwini Upadhyay, challenged the TDS mechanism, arguing that it infringes upon constitutional rights.
The Supreme Court bench, headed by Chief Justice of India (CJI) Sanjiv Khanna, declined to entertain the petition, calling it “very badly drafted.” “Sorry, we will not entertain it. It is very badly drafted. However, you can move the Delhi High Court,” the CJI remarked. The bench also pointed out that the TDS system has been widely adopted in many countries, which suggests its validity and utility.
The PIL, filed by advocate Ashwani Dubey, aimed to scrap the TDS system, labeling it “arbitrary and irrational” while alleging that it violates fundamental rights, particularly the right to equality. The plea sought a review of the framework under the Income Tax Act, which mandates the deduction of tax at the time of payment and its deposit with the income tax department. The deducted amount is later adjusted against the payee’s tax liability.
The petition named the Centre, Ministry of Law and Justice, Law Commission, and NITI Aayog as respondents, arguing that the current structure of TDS violates constitutional rights and is in need of re-evaluation.
The TDS system, in place across India, is designed to ensure timely tax collection at the source of income generation. Under this system, the payer (referred to as the “deductor”) is responsible for deducting a certain percentage of tax before making a payment to the recipient (referred to as the “deductee”). The deducted amount is then deposited with the government. The PIL sought to challenge this practice, calling for a reassessment of its structure and legality.
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