My company withdraws crores in cash every month to pay plantation wages. The bank is deducting under section 194N even though the withdrawal is my own money and not income. Is there a challenge to the section, and where does it stand?
There is, and it is live rather than decided. Md. Nizamuddin J of the Calcutta High Court, holding that the grounds 'have some substance and requires consideration for final adjudication', admitted the writ petition and granted an interim order restraining the authorities from deducting tax at source under section 194N, following a line of unreported Kerala High Court orders beginning with Kanan Devan Hills Plantations Company Pvt. Ltd. v. Union of India, WP(C) No. 1658 of 2020, order dated 13 August 2020. No decision on the merits is given here: none has been established.
Decided by the High Court (Md. Nizamuddin, J (single judge), High Court at Calcutta, Constitutional Writ Jurisdiction, Appellate Side) on 2021-07-08, reported as WPA 10826 of 2021, order dated 8 July 2021 (heard through video conference; Mr. J.P. Khaitan, Senior Advocate, for the petitioners; Mr. Y.J. Dastoor, Additional Solicitor General, for the Union of India). It bears on section 194N, section 139(1) of the Income Tax Act 1961, in TDS Defaults, Cash Transaction Limits and How Tax Law Is Read matters.
The petitioners' point is short and constitutional: Entry 82 of List I of the Seventh Schedule empowers Parliament to make laws for taxes on income, and section 194N requires deduction from an amount that is admittedly not income at all — a person withdrawing his own bank balance. If that is right, the section is beyond legislative competence. The practical significance for a deductee is that this is a court that has been willing to restrain the deduction pending decision, so a tea garden, a co-operative society, a mandi trader or anyone else with a wage-bill paid in cash has a route to interim relief rather than a refund claim years later. Two limits must be stated plainly. First, the order is interim: Md. Nizamuddin J expressly listed the writ petition for final hearing and directed affidavits, and in the later order in Goodricke Group Limited he confined the benefit of the interim order to the writ petitioners before him. Second, this is not a holding that section 194N is invalid, and nothing in either order should be presented as one. What the orders do establish, on the Court's own record, is that as at 8 July 2021 the learned Additional Solicitor General had confirmed on instructions that no appeal had been filed against the Kerala High Court's interim order and that it was still subsisting, and that as at 27 April 2022 no appeal had been filed against the two Calcutta interim orders either.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The petitioners challenged the constitutional validity and legality of section 194N of the Income-tax Act, 1961, which mandates deduction of tax at source at two per cent on cash withdrawals from, among others, a banking company exceeding Rs 1 crore in a financial year. The order records that the section was inserted by the Finance Act, 2019, became effective from 1 September 2019, and has been substituted by the Finance Act, 2020. The petitioners submitted that the section is beyond the legislative competence of Parliament because Entry 82 of List I of the Seventh Schedule to the Constitution allows Parliament to enact laws for the imposition, collection and levy of tax on 'income', and Parliament cannot legislate a provision stipulating deduction of tax at source from an amount which is admittedly not income. They relied on several unreported decisions of the Kerala High Court on the same issue, one of which is the order dated 13 August 2020 in Kanan Devan Hills Plantations Company Pvt. Ltd. v. Union of India, WP(C) No. 1658 of 2020, in which that Court admitted the writ petition and granted an interim stay of deduction under section 194N. On an earlier occasion the respondents had been given an opportunity to seek instructions whether that Kerala order had been further challenged, and the Additional Solicitor General submitted on instructions that no further appeal had been filed and that the interim order was still existing; it was also submitted that a series of orders had been passed by the Kerala High Court on the same issue admitting writ petitions and staying deduction under section 194N.
The Court held that the grounds on which the legislation is challenged, as they appear from the grounds of the writ petition, have some substance and require consideration for final adjudication, and granted an interim order restraining the respondent authorities concerned from deducting tax at source on the basis of the provisions of section 194N until 30 September 2021. The respondents were directed to file affidavits-in-opposition within four weeks, the petitioners to reply within two weeks thereafter, and the matter was directed to appear for final hearing after eight weeks. This is an interim order; the Court did not decide the validity of section 194N.
The Court did not give reasons of its own on the constitutional question. It recorded the petitioners' Entry 82 argument, stated its prima facie view that the grounds have some substance and require consideration for final adjudication, and rested the grant of interim relief on that view together with the fact that the Kerala High Court had admitted writ petitions raising the same issue and stayed deduction, and that the Union had confirmed on instructions that no appeal had been filed against those orders and that the interim relief there was subsisting.
Considering these facts, I am inclined to grant an interim order restraining the respondents authorities concerned from deducting tax on source on the basis of the aforesaid provisions of Section 194N till 30th September, 2021.
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Handle my notice → Ask a CA on WhatsAppThere is, and it is live rather than decided. Md. Nizamuddin J of the Calcutta High Court, holding that the grounds 'have some substance and requires consideration for final adjudication', admitted the writ petition and granted an interim order restraining the authorities from deducting tax at source under section 194N, following a line of unreported Kerala High Court orders beginning with Kanan Devan Hills Plantations Company Pvt. Ltd. v. Union of India, WP(C) No. 1658 of 2020, order dated 13 August 2020. No decision on the merits is given here: none has been established. This was decided by the High Court (Md. Nizamuddin, J (single judge), High Court at Calcutta, Constitutional Writ Jurisdiction, Appellate Side) and bears on section 194N, section 139(1) of the Income Tax Act 1961. It is reported as WPA 10826 of 2021, order dated 8 July 2021 (heard through video conference; Mr. J.P. Khaitan, Senior Advocate, for the petitioners; Mr. Y.J. Dastoor, Additional Solicitor General, for the Union of India). The petitioners' point is short and constitutional: Entry 82 of List I of the Seventh Schedule empowers Parliament to make laws for taxes on income, and section 194N requires deduction from an amount that is admittedly not income at all — a person withdrawing his own bank balance. If that is right, the section is beyond legislative competence. The practical significance for a deductee is that this is a court that has been willing to restrain the deduction pending decision, so a tea garden, a co-operative society, a mandi trader or anyone else with a wage-bill paid in cash has a route to interim relief rather than a refund claim years later. Two limits must be stated plainly. First, the order is interim: Md. Nizamuddin J expressly listed the writ petition for final hearing and directed affidavits, and in the later order in Goodricke Group Limited he confined the benefit of the interim order to the writ petitioners before him. Second, this is not a holding that section 194N is invalid, and nothing in either order should be presented as one. What the orders do establish, on the Court's own record, is that as at 8 July 2021 the learned Additional Solicitor General had confirmed on instructions that no appeal had been filed against the Kerala High Court's interim order and that it was still subsisting, and that as at 27 April 2022 no appeal had been filed against the two Calcutta interim orders either. If it applies to you, the first step is this: If you are facing continuing section 194N deduction on withdrawals that are not income, consider a writ petition rather than a refund route; the relief actually granted in this line is an interim restraint on deduction, not a declaration.
The petitioners challenged the constitutional validity and legality of section 194N of the Income-tax Act, 1961, which mandates deduction of tax at source at two per cent on cash withdrawals from, among others, a banking company exceeding Rs 1 crore in a financial year. The order records that the section was inserted by the Finance Act, 2019, became effective from 1 September 2019, and has been substituted by the Finance Act, 2020. The petitioners submitted that the section is beyond the legislative competence of Parliament because Entry 82 of List I of the Seventh Schedule to the Constitution allows Parliament to enact laws for the imposition, collection and levy of tax on 'income', and Parliament cannot legislate a provision stipulating deduction of tax at source from an amount which is admittedly not income. They relied on several unreported decisions of the Kerala High Court on the same issue, one of which is the order dated 13 August 2020 in Kanan Devan Hills Plantations Company Pvt. Ltd. v. Union of India, WP(C) No. 1658 of 2020, in which that Court admitted the writ petition and granted an interim stay of deduction under section 194N. On an earlier occasion the respondents had been given an opportunity to seek instructions whether that Kerala order had been further challenged, and the Additional Solicitor General submitted on instructions that no further appeal had been filed and that the interim order was still existing; it was also submitted that a series of orders had been passed by the Kerala High Court on the same issue admitting writ petitions and staying deduction under section 194N. The matter was decided on 2021-07-08 by the High Court (Md. Nizamuddin, J (single judge), High Court at Calcutta, Constitutional Writ Jurisdiction, Appellate Side). On those facts the High Court held as follows. The Court held that the grounds on which the legislation is challenged, as they appear from the grounds of the writ petition, have some substance and require consideration for final adjudication, and granted an interim order restraining the respondent authorities concerned from deducting tax at source on the basis of the provisions of section 194N until 30 September 2021. The respondents were directed to file affidavits-in-opposition within four weeks, the petitioners to reply within two weeks thereafter, and the matter was directed to appear for final hearing after eight weeks. This is an interim order; the Court did not decide the validity of section 194N.
The Court did not give reasons of its own on the constitutional question. It recorded the petitioners' Entry 82 argument, stated its prima facie view that the grounds have some substance and require consideration for final adjudication, and rested the grant of interim relief on that view together with the fact that the Kerala High Court had admitted writ petitions raising the same issue and stayed deduction, and that the Union had confirmed on instructions that no appeal had been filed against those orders and that the interim relief there was subsisting. In the words reproduced by the source cited on this page: "Considering these facts, I am inclined to grant an interim order restraining the respondents authorities concerned from deducting tax on source on the basis of the aforesaid provisions of Section 194N till 30th September, 2021." The decision followed or applied Kanan Devan Hills Plantations Company Pvt. Ltd. v. Union of India, WP(C) No. 1658 of 2020 (Kerala High Court), order dated 13 August 2020 — relied on; not itself retrieved this pass.
It was decided by the High Court on 2021-07-08 and is reported as WPA 10826 of 2021, order dated 8 July 2021 (heard through video conference; Mr. J.P. Khaitan, Senior Advocate, for the petitioners; Mr. Y.J. Dastoor, Additional Solicitor General, for the Union of India). Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 194N, section 139(1), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The Court held that the grounds on which the legislation is challenged, as they appear from the grounds of the writ petition, have some substance and require consideration for final adjudication, and granted an interim order restraining the respondent authorities concerned from deducting tax at source on the basis of the provisions of section 194N until 30 September 2021. The respondents were directed to file affidavits-in-opposition within four weeks, the petitioners to reply within two weeks thereafter, and the matter was directed to appear for final hearing after eight weeks. This is an interim order; the Court did not decide the validity of section 194N. It arises in TDS Defaults, Cash Transaction Limits and How Tax Law Is Read matters, on section 194N, section 139(1) of the Income Tax Act 1961, and was decided by Md. Nizamuddin, J (single judge), High Court at Calcutta, Constitutional Writ Jurisdiction, Appellate Side. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Plead the ground the Court found arguable: that Entry 82 of List I permits taxation of income, and that deduction at source from a sum admittedly not income is outside that competence. Annex the Kerala High Court order dated 13 August 2020 in Kanan Devan Hills Plantations Company Pvt. Ltd. v. Union of India, WP(C) No. 1658 of 2020, and the Calcutta orders in this case (WPA 10826 of 2021) and in Goodricke Group Limited (WPA No. 7061 of 2022). Assume no benefit unless you are a petitioner. The Goodricke order says in terms that the benefit of the interim order is confined to the writ petitioners. Check the current status of these writ petitions before advising: every order recorded here is interim and time-limited, and the library's existing entries on the Madras High Court (Tirunelveli District Central Co-operative Bank; Molasi Primary Agricultural Cooperative Credit Society) and the Karnataka High Court (Raitha Seva Sahakara Sangha Niyamita) cover the other High Court lines. In the meantime look first at the statutory exclusions in section 194N itself — Government, banks and co-operative banks and post offices, business correspondents and white label ATM operators are outside it, and the Central Government may notify recipients for whom it does not apply or applies at a reduced rate.
Under appeal, and the appeal has not been decided. This is an interim order in a challenge that has never been decided, so it should be used as such. Later citations of the order are unreliable, because six of them are to a different matter altogether — a 2013 Gauhati excise case, Amalgamated Plantations (P) Ltd v Union of India, 2013 (2) GLR 732, which shares the petitioner's name. The Calcutta High Court has since repeated the order twice for other tea companies: Tyroon Tea Company Ltd v Union of India (24 November 2021) and Goodricke Group Ltd v Union of India (27 April 2022), both recording the contention that 'section 194N of the said Act is beyond the legislative competence of the Parliament' and both expressly following 'orders dated July 8, 2021 in WPA No.10826 of 2021'. In Goodricke the Bench restrained the authorities from deducting tax at source under section 194N until 11 July 2022 or further orders, admitted the petition and listed it for final hearing after seven weeks. As at that date the constitutional question was still undecided and the relief was interim and petitioner-specific. Nothing overruling or doubting the order is recorded, but a practitioner should not treat it as a holding that section 194N is bad — it is a stay pending decision, and protection has been given only to those who have moved the Court. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
This is a daily-list interim order and it has NO numbered paragraphs at all; there is therefore no paragraph locator to give, and any citation attributing a paragraph number to it would be fabricated. Its structure is a cause-title block (S/L 20, 08.07.2021, Court No. 2, WPA 10826 of 2021, parties, video conference, counsel), then four unnumbered passages — the challenge and the Entry 82 argument; the reliance on the Kerala High Court orders and the Additional Solicitor General's instruction that no appeal had been filed; the grant of interim relief until 30 September 2021; and the directions for affidavits and final hearing — ending with the signature of Md. Nizamuddin, J. The substance of the order is confirmed by a second document. The same judge's order of 27 April 2022 in Goodricke Group Limited & Anr. v. Union of India, WPA No. 7061 of 2022, recites the identical challenge, the same Kerala High Court order, and this order by its number and date. Both orders describe section 194N as 'inserted by the Finance Act, 2019' with effect from 1 September 2019 and 'substituted by the Finance Act, 2020'. The substitution is footnoted to Act No. 12 of 2020 with effect from 1 July 2020, so the date the Court gives for the substitution is the date of the amending Act and not the date the substituted text came into force; the Act which inserted the section in 2019 is Act No. 23 of 2019. None of that affects the ratio, but it matters if you are pleading which text of section 194N governs a particular withdrawal. Two things this entry does not establish. There is no final judgment in this writ petition or in any of the companion petitions, and the current status of any of them is not established here; what is said above about appeals is only what these two orders themselves record. And the Kerala High Court order of 13 August 2020 in Kanan Devan Hills Plantations has not been read — it is unreported, and it is known here only from the way these two Calcutta orders describe it. If you intend to rely on the Kerala line, obtain the order from the Kerala High Court's own records rather than from the description of it in this order, because the description is a summary given by a judge of another High Court for the limited purpose of granting interim relief. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The Court held that the grounds on which the legislation is challenged, as they appear from the grounds of the writ petition, have some substance and require consideration for final adjudication, and granted an interim order restraining the respondent authorities concerned from deducting tax at source on the basis of the provisions of section 194N until 30 September 2021. The respondents were directed to file affidavits-in-opposition within four weeks, the petitioners to reply within two weeks thereafter, and the matter was directed to appear for final hearing after eight weeks. This is an interim order; the Court did not decide the validity of section 194N.
TaxSphere, “Amalgamated Plantations Pvt. Ltd. v. Union of India (Calcutta High Court) — the challenge to section 194N as beyond Entry 82 because a cash withdrawal is not income, and the interim stay that has followed it”, https://taxnotice.vittsphere.com/caselaw/case/amalgamated-plantations-194n-legislative-competence-challenge-calcutta-interim-stay/ (validity last checked 2026-09-08)
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My bank has deducted under section 194N on my cash withdrawals. What are the thresholds and rates as the section now stands, and is there anything that takes me out of it?
We are a primary agricultural credit society drawing cash to lend to farmers. Must the bank still deduct under s.194N?
My society's bank has marked a lien on its current account for s.194N tax on cash withdrawals which the bank itself never deducted. Can a bank do that, and is the society liable?
Must I deduct under 194N on cash withdrawals that are not the account holder's income?
