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M/s State Bank of India Versus DCIT (TDS) , Kanpur

2016 (3) TMI 282 - ITAT LUCKNOW

Qualification for exemption u/s 10(5) - LTC paid to the employees involving foreign travel - TDS on the payment of LTC to the employees - Held that:- As per provisions of section 10(5) of the Act, only that reimbursement of travel concession or assistance to an employee is exempted which was incurred for travel of the individual employee or his family members to any place in India. Nowhere in this clause it has been stated that even if the employee travels to foreign countries, exemption would b .....

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aised the claim; meaning thereby the assessee was aware of the fact that its employees have travelled in foreign countries, for which he is not entitled for exemption under section 10(5) of the Act. Thus, the payment made to its employees is chargeable to tax and in that situation, the assessee is under obligation to deduct TDS on such payment, but the assessee did not do so for the reasons best known to it. We have also carefully examined the Circular placed by the ld. counsel for the assessee .....

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reby this Circular was passed consequent to the interim order of the Hon’ble Madras High Court. But in the present case, the journey was undertaken in the year 2012 and the bills were settled during that year; meaning thereby at the relevant point of time when the bills were settled, there was no order of the Hon’ble Madras High Court and the assessee was under obligation to deduct TDS on the reimbursement of expenditure incurred by the assessee on foreign travel. In the light of these facts, we .....

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p Mehrotra, Advocate For The Respondent : Shri. Amit Nigam, D.R. ORDER PER SUNIL KUMAR YADAV: These appeals are preferred by the assessee against the respective orders of the ld. CIT(A). Since common issues are involved in these appeals, these were heard together and are being disposed of through this consolidated order for the sake of convenience. We, however, prefer to reproduce the grounds raised in I.T.A. No. 138/LKW/2015 as under:- 1. That the Learned Commissioner of Income Tax (Appeal) has .....

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ination but was part of the package and circuitous route offered by the travel agency under the package availed by the employees. 4. That the Learned Commissioner of Income Tax (Appeal) has erred on facts in dismissing the appeal on the point of TDS liability is erroneous, not based on the facts of the case is unjustified & bad in law liable to be quashed. 5. That the order dated 13/01/2015 passed by the CIT (A) is not based on the correct appreciation of the case laws cited during the cours .....

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short the Act") clearly stipulates that exemption under section 10(5) of the Act is available only for travel to any place in India and restricted to the amount of expenses actually incurred for the purpose of such travel read with conditions as per rule 2B of the Income Tax Rule, 1962. The Assessing Officer accordingly issued notice under section 201(1)(/201(1A) of the Act to the assessee requiring to explain as to why TDS was not deducted on the amount of reimbursement of LFC. Since the s .....

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01(1A) of the Act was also charged. 3. Aggrieved, the assessee preferred appeals before the ld. CIT(A) with the submission that the Assessing Officer has not appreciated the bona fide plea of the bank in granting benefit of LTC paid to the bank employees to travel out of India. It was further contended that the employee is entitled for exemption under section 10(5) of the Act to the extent of expenses incurred for travelling in India where the employees designated place is not in India. It was f .....

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accordingly directed the Assessing Officer to recalculate the liability for TDS @ 10%. 5. Aggrieved, the assessee is in appeal before the Tribunal and reiterated its contentions. The ld. counsel for the assessee has also placed reliance upon the Circular/letter issued by the Dy. Managing Director of State Bank of India in the light of order of the Hon ble Madras High court dated 16.2.2015 whereby the Hon ble Madras High Court has directed not to deduct TDS on the amount paid or reimbursed to the .....

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per provisions of section 10(5) of the Act, only that reimbursement of expenses, which were incurred on travel of employees and his family to any place in India subject to certain limits, are exempt. Since the employee of the assessee has travelled to foreign countries, the benefit of exemption available under section 10(5) of the Act cannot be granted to the employees. No doubt, at the time of advancement of LTC amount, the employer may not be knowing, but at the time of settlement of bills of .....

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sed the demand under section 201(1) and 201(1A) of the Act. 7. So far as the Circular issued by the banker is concerned, the ld. D.R. has invited our attention that the interim order was passed by the Hon ble Madras High Court on 16.2.2015, in which they have stated that after 16.2.2015 no TDS would be deducted on the reimbursement to the employee of the banker in respect of LTC/HTC availed. But in the instant case, the date of journey was in the year 2012, therefore, at the relevant point of ti .....

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xempted which was incurred for travel of the individual employee or his family members to any place in India. Nowhere in this clause it has been stated that even if the employee travels to foreign countries, exemption would be limited to the expenditure incurred to the last destination in India. For the sake of reference, we extract the provisions of section 10(5) of the Act as under:- 10. In computing the total income of a previous year of any person, any income falling within any of the follow .....

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rescribed (including conditions as to number of journeys and the amount which shall be exempt per head) having regard to the travel concession or assistance granted to the employees of the Central Government: 9. On perusal of this section, we are of the view that this provision was introduced in order to motivate the employees and also to encourage tourism in India and, therefore, the reimbursement of LTC/LFC was exempted, but there was no intention of the Legislature to allow the employees to t .....

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avelled, for which he has raised the claim; meaning thereby the assessee was aware of the fact that its employees have travelled in foreign countries, for which he is not entitled for exemption under section 10(5) of the Act. Thus, the payment made to its employees is chargeable to tax and in that situation, the assessee is under obligation to deduct TDS on such payment, but the assessee did not do so for the reasons best known to it. We have also carefully examined the Circular placed by the ld .....

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