Tax deduction at source classification upheld where fiscal machinery provision and notification were not shown to be arbitrary.

Section 34(1) of the U.P. Value Added Tax Act, 2008 was treated as a machinery and tax-collection provision, not a charging provision, and the State's power to notify specified payments for deduction at source was upheld. The court held that fiscal legislation allows wide legislative discretion in classification and in choosing transactions for collection measures, so long as the classification is not palpably arbitrary. The 7 October 2013 notification imposing deduction of tax at source on specified payments to educational institutions was therefore a valid exercise of delegated power, and the Article 14 challenge based on alleged hostile discrimination failed.

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Issues: Whether Section 34(1) of the U.P. Value Added Tax Act, 2008 and the notification dated 7 October 2013 imposing deduction of tax at source on specified payments to educational institutions were unconstitutional for violating Article 14 and being arbitrary.

Analysis: Section 34 was held to be a machinery and collection provision, not a charging provision. The power given to the State Government to issue a notification in specified cases was supported by legislative safeguards in the remaining sub-sections. In fiscal legislation, the legislature has wide latitude in classification and in selecting transactions for tax collection measures, and it is not required to bring every conceivable transaction within the deduction regime. The notification was upheld as a permissible exercise of the delegated power, and the challenge based on alleged hostile discrimination failed in the absence of a constitutional infirmity.

Conclusion: The challenge to Section 34(1) and to the notification dated 7 October 2013 was rejected, and the provisions were held valid.

Final Conclusion: The petitions failed on the constitutional challenge, and the impugned tax deduction regime was sustained.

Ratio Decidendi: A fiscal machinery or collection provision may validly authorise selective tax deduction at source on specified transactions if the classification is not palpably arbitrary, and Article 14 does not require the State to tax or collect at source from every conceivable transaction or entity.

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