New Delhi: The Supreme Court on Friday refused to examine a PIL seeking scrapping of tax deducted at source (TDS) framework under the Income Tax Act and said it was levied everywhere in the world.
A bench comprising Chief Justice Sanjiv Khanna and Justice Sanjay Kumar said TDS was levied almost everywhere in the world, and moreover, there were judgements in support of it.
The PIL challenged the TDS framework under the Income Tax Act, which mandates the deduction of tax at the time of payment by the payer and its deposit with the income tax department.
The deducted amount is adjusted against the payee’s tax liability.
“Sorry we will not entertain it… It is very badly drafted. However, you can move the Delhi High Court,” said the bench.
Advocate Ashwini Upadhyay, who filed the PIL in his personal capacity through advocate Ashwani Dubey, said the TDS system needed to be scrapped.
The CJI, however, said there could be some important issues related to IT Rules and it could be filed in the Delhi High Court.
The bench, in its order, did not make any observations on the case’s merits or demerits and left it to the high court to decide it afresh when the plea was filed.
The plea sought to scrap the TDS system calling it “arbitrary and irrational” and violative of various fundamental rights, including equality and made the Centre, Ministry of Law and Justice, Law Commission of India, and NITI Aayog as parties.
It sought a direction to “declare the TDS system manifestly arbitrary, irrational and against Articles 14 (right to equality), 19 (right to practice profession) and 21 (right to life and personal liberty) of the Constitution, hence void and inoperative”.
The plea further sought directions to the NITI Ayog to consider contentions raised in the plea and suggest necessary changes in TDS system.
It said the law commission should examine the legality of the TDS system and prepare a report within three months.
The TDS system imposes significant administrative and financial burdens on taxpayers tasked with compliance which include managing complex rules, issuing TDS certificates, filing returns, and defending against penalties for inadvertent errors, argued the plea.
Assessees often incur substantial expenses, ranging from salaries of compliance staff to professional fees for tax consultants, without receiving compensation, it said.
The plea said the system violated Article 14 (equality before the law) by disproportionately burdening economically weaker sections and small earners who lack the capacity to navigate its technical requirements.
Referring to Article 23, it said the imposition of tax collection duties on private citizens amounted to forced labour.
The TDS system was stated to adversely affect individuals below the taxable income threshold, as tax was deducted at source irrespective of their liability.
“The regulatory and procedural framework surrounding TDS is excessively technical, often requiring specialised legal and financial expertise, which most assessees lack. The result is an unjust shifting of sovereign responsibilities from the government to private citizens without adequate compensation, resources, or legal safeguards,” it said.
