Banks Must Deduct TDS Under Section 194N on Government Subsidy Payments Despite Source of Funds

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....The HC upheld the bank's obligation to deduct TDS under Section 194N on government subsidy payments made to the petitioners. The court determined that the bank must comply with mandatory tax deduction requirements regardless of the source of funds being government subsidies. While acknowledging that petitioners could receive refunds after assessment if no tax was ultimately payable, the court emphasized that Section 194N creates a mandatory obligation that cannot be circumvented. The HC referenced its previous ruling in a similar case which established that Section 194N mandates 2% deduction on cash withdrawals to promote a cashless economy, and notably cannot be avoided through the lower/nil deduction mechanism available under Section 197 for other provisions.....