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2014 (12) TMI 870 - HC - VAT and Sales TaxCollection of VAT by way of TDS - Constitutional Validity of provisions of section 34 of U.P. Value Added Tax Act, 2008 and notification dated 7 October 2013 – Claim of petitioner being private unaided institutions - Section 34 violates Article 14 of the Constitution and suffer from arbitrariness or not – Held that:- The validity of legislation cannot be determined on the basis of its crudities or inequities, particularly when matters of classification in fiscal legislation are involved - The legislature is not bound to bring within the fold of a provision for the deduction of tax at source, all possible transactions in order for the collection or recovery machinery to be lawful and valid - It is open to the legislature to impose a requirement that the liability to deduct tax at source would be attracted in those cases where the legislature or its administrative agency appointed under the law believes that the possibility for evasion must be plugged - Here again, it would be impossible for the legislature to envisage a situation where every possibility for evasion is ruled out - the legislature, by conferring a degree of latitude or discretion on the executive, does not breach the requirement of a valid classification under Article 14 of the Constitution. Shashikant Laxman Kale And Another Versus Union of India And Others [1990 (7) TMI 3 - SUPREME Court] it has been held that in a taxing statute a greater degree of latitude in matters of classification is permissible, noted that in order to tax something it is not necessary to tax everything - prior to the notification which was issued on 7 October 2013, an earlier notification was issued u/s 34(1) of the VAT Act on 4 March 2008 under which a liability to deduct tax at source was imposed on every person responsible for making payment to a contractor in discharge of a liability under a works contract - The categories of works contracts covered by the notification included transactions between a contractor and several other entities including a University, educational institution and training centre - when the legislation has conferred upon the State a discretion to issue a notification to bring within the purview of section 34(1) certain specific transactions where a liability to deduct tax at source would arise, it is not necessary for the State, in order to sustain the validity of its action, to impose such a liability on every transaction with every conceivable entity - The notification cannot also be read down as sought. The challenge either to the validity of the provisions of section 34(1) or to the validity of the notification dated 7 October 2013 cannot be accepted - the statutory provision is not a charging provision but a provision for collection and recovery of tax - The legislature was entitled to leave it open to the State to fasten a requirement of deducting tax at source in certain specified situations or transactions - sufficient safeguards have been introduced particularly in sub-sections (2) to (6) of section 34, as noted earlier in the course of the judgment - The notification which has been issued on 7 October 2013 has not transgressed either the parameters set out in section 34(1) or the norms of Article 14 - The challenge on the ground that there has been a violation of Article 14 failed – Decided against petitioner.
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