Tax deduction at source by public companies upheld in principle, but discriminatory classification failed Article 14 scrutiny.

Public companies were treated as properly identified where the pleadings and cause title, read with the Companies Act, 1956, sufficiently disclosed their character, so the writ petitions were maintainable. Section 27 of the Assam General Sales Tax Act, 1993, requiring public companies to deduct tax at source and follow the deposit procedure, was held to be a permissible measure for tax collection and prevention of evasion and not an unreasonable restriction under Article 19(1)(g). The provision was nevertheless found discriminatory under Article 14 because it singled out public companies without an intelligible differentia rationally connected to the object of the law, and was invalid to that extent.

---

---

Issues: (i) whether the writ petitions were maintainable as filed by companies described as limited companies, and (ii) whether section 27 of the Assam General Sales Tax Act, 1993, insofar as it compelled public companies to deduct tax at source and comply with the deposit procedure, was constitutionally valid under Articles 14 and 19(1)(g) of the Constitution of India.

Issue (i): Whether the writ petitions were maintainable as filed by companies described as limited companies.

Analysis: The description of the petitioners as limited companies, read with the statutory mode of describing public limited companies under the Companies Act, 1956, was sufficient to infer that they were public companies. The absence of an express recital using the words public company did not defeat maintainability when the pleadings and cause title disclosed the character of the petitioners.

Conclusion: The petitions were maintainable.

Issue (ii): Whether section 27 of the Assam General Sales Tax Act, 1993, insofar as it compelled public companies to deduct tax at source and comply with the deposit procedure, was constitutionally valid under Articles 14 and 19(1)(g) of the Constitution of India.

Analysis: The object of the provision was to secure tax collection and prevent evasion, and the Court held that the requirement of deduction at source did not impose an unreasonable restriction on the petitioners' business so as to offend Article 19(1)(g). However, the classification adopted by section 27 singled out public companies while leaving out private companies, Hindu undivided families, and individuals, without a demonstrated intelligible differentia having a rational nexus with the object of the law. The differentiation was therefore treated as arbitrary and discriminatory under Article 14.

Conclusion: The provision was upheld against the Article 19(1)(g) challenge but struck down as violative of Article 14 insofar as it applied to public companies.

Final Conclusion: The constitutional challenge succeeded in part, with the impugned provision being invalidated only to the extent of its application to public companies, while the challenge based on Article 19(1)(g) failed.

Ratio Decidendi: A statutory classification must rest on an intelligible differentia having a rational nexus with the object of the enactment, and a deduction-at-source requirement is not an unreasonable restriction merely because it is onerous if it is otherwise directed to preventing tax evasion and securing revenue.

---