Court grants interim order restraining tax deduction under Section 194N until 09/30/2021. Petitioner's challenge noted. The Court granted an interim order restraining tax deduction under Section 194N of the Income Tax Act, 1961 until September 30, 2021. The Court noted the ...
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Court grants interim order restraining tax deduction under Section 194N until 09/30/2021. Petitioner's challenge noted.
The Court granted an interim order restraining tax deduction under Section 194N of the Income Tax Act, 1961 until September 30, 2021. The Court noted the petitioner's substantial grounds for challenge and referenced an unreported decision of the Kerala High Court granting an interim stay on tax deduction under the same provision. The respondents were directed to file an affidavit-in-opposition within four weeks, and the matter was scheduled for final hearing after eight weeks for a comprehensive adjudication on the constitutional validity and legality of Section 194N.
Issues: Challenge to the constitutional validity and legality of Section 194N of the Income Tax Act, 1961.
Analysis: The petitioner challenged the constitutional validity and legality of Section 194N of the Income Tax Act, 1961, which mandates a 2% tax deduction on cash withdrawals exceeding Rs. 1 crore in a financial year. The petitioner argued that this provision goes beyond the legislative competence of the Parliament as it pertains to taxing "income," and the amount subject to deduction is not income. The petitioner's grounds for challenge were deemed substantial and warrant consideration by the Court.
The petitioner cited unreported decisions of the Kerala High Court on the same issue, including an order granting an interim stay on tax deduction under Section 194N. The Court noted that no further appeal had been filed against the Kerala High Court's order, and the interim stay remained in effect. Given these circumstances, the Court decided to grant an interim order restraining tax deduction under Section 194N until September 30, 2021.
The respondents were directed to file an affidavit-in-opposition within four weeks, with the petitioner given two weeks to respond. The matter was scheduled for final hearing after eight weeks, allowing both parties to present their arguments comprehensively before the Court for a final adjudication on the constitutional validity and legality of Section 194N of the Income Tax Act, 1961.
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