TMI Blog2017 (4) TMI 109X X X X Extracts X X X X X X X X Extracts X X X X ..... e are of the considered opinion that the Revenue has rightly held the assessee to be in default, as the assessee has not deducted TDS intentionally on the reimbursement of expenditure incurred on LTC/LFC. Moreover, the ld. CIT(A) has directed the Assessing Officer to recalculate the liability of TDS at 10%. In view thereof, we reject the claim of the assessee of exemption under section 10(5) of the Act. - Decided against assessee - ITA No. 145/JP/2017, ITA No. 146/JP/2017, S. A. No. 04, 05/JP/2017 - - - Dated:- 28-3-2017 - Shri Kul Bharat, JM And Shri Vikram Singh Yadav, AM Assessee by : Smt. Neelam Ashok ( C. A. ) Revenue by : Shri Prem Prakash Meena ( JCIT ) ORDER Per Shri Vikram Singh Yadav, A. M. These are two appeals filed by the assessee against the order of the Ld. CIT(A)-5, Jaipur dated 11. 11. 2016 for A. Y. 2013-14 2014-15 respectively. The assessee has also filed two stay petitions in respect of demand raised by the Assessing Officer of ₹ 7,76,365/- for A. Y. 2013-14 ₹ 12,10,074/- for A. Y. 2014-15. Since common issues are involved in these appeals and stay petitions, the same were heard together and disposed off by this consolid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yee is entitled to exemption under section 10(5) to the extent of expenses incurred for travel in India where the employee s designated place is in India and he actually visits the place as designated even in cases where the journey undertaken by an employee involves a foreign leg. 7. Without prejudice to the above, the learned CIT erred in applying a flat rate of 30% for computation of TDS instead of applying the actual income-tax rate applicable in case of each employee. 8. Without prejudice to the above, the learned CIT erred in computing interest for a period of 35 months (i. e. from 1 April 2011 to 28 February 2014) instead of considering the actual date of payment of the LTC in case of each employee. 9. The learned CIT erred in not appreciating the submissions made by the Bank in the correct perspective. 2. All these grounds primarily relates to the benefit of leave travel concession granted by the assessee bank to its employees and non-deduction of TDS on the payment of leave travel concession by the assessee to its employees and the corresponding interest thereon. 3. Briefly the facts of the case are that the assessee bank provides the benefit of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and has treated the assessee bank as an assessee in default for purpose of section 201 and raised the following demand: Financial Year Amount used outside India (Rs. ) Non/Short Deduction (Rs. ) Interest (Rs. ) Total (Rs. ) 2012-13 19,85,579 5,95,675 1,80,690 7,76,365 5. Being aggrieved, an appeal was filed before the ld CIT(A), Jaipur which was dismissed and hence, the present appeal before us. 6. Before we advert to the ld AR s contentions, it would be relevant to refer to the findings of the ld CIT(A) which are under challenge before us: 3. 3 I have considered the facts of the case, the assessment order and the submissions of the appellant. The brief facts of the case are that the AO observed that the appellant had not deducted TDS on the amount of reimbursement of Leave Travel Concession (LTX)/Leave Fare Concession (LFC) given to the employees even in the cases where a foreign destination was included in the itinerary of their journey. Section 10(5) of the Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herwise almost entire journey is a foreign travel for all practical purposes. In these circumstances, exemption u/s 10(5) would not be available. This view finds support from the decision of Hon ble ITAT, Chandigarh Bench in the case of Sh. Om Prakash Gupta vs. ITO in ITA No. 938/Chd/2011 dated 29-04-2013. 3. 5 As far as the claim of bonafide belief is concerned, no doubt, the assessee may not be aware with the ultimate plan of travel of its employees, but at the time of settlement of LTC/LFC bills, complete facts are available before the assessee as to where the employees have travelled, for which he has raised a claim; meaning thereby that the assessee was aware of the fact that its employees have travelled in foreign countries for which he is not entitled to exemption u/s 10(5). In fact, the way the reimbursements have been made, indicates the complicity of the assessee. For example, in the case of Sh. Navin Khanna, who has travelled from Jaipur to Delhi to Port Blair via Singapore and Malaysia in the month of June, 2012 and has raised a claim of ₹ 3,90,163, an amount of ₹ 3,76,131 (almost equal claim in most of the cases) has been calculated as his eligibility ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bank reimburses the LTC claim made by the employees only where the employee s designated place is anywhere in India and he actually visits the place as designated. In case an employee travels outside India during the course of his visit to a place in India, reimbursement is made to him for his entire journey by the circuitous route provided the reimbursement made to him is limited to the actual fare/hire charges for the entire journey or the cost of fare to his home town/designated place, by the shortest route, by the entitled class whichever is lower. The Bank has issued Circular No. ADM/037239 dated 20 August 1981 in this regard. 7. 4 An employee undertaking journey under LTC is eligible for reimbursement of travelling expenses i. e. air/rail/steamer/road fare by the entitled class for the permissible distance, or the actual cost of travelling for the entire journey, whichever is lower. Further, only travel expenses are reimbursable. The Bank has issued Circular No. CDO/P HRD-PM/41/2013-14 dated 29 October 2013 in this regard. For example, where there is a single itinerary for India and overseas travel is also involved, say, Mumbai-Kolkata-Singapore-Mumbai, and where the desi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... day of October, 1997, by air, an amount not exceeding the air economy fare of the national carrier by the shortest route to the place of destination; (ii) Where places of origin of journey and destination are connected by rail and the journey is performed on or after the 1st day of October, 1997, by any mode of transport other than by air, an amount not exceeding the air- conditioned first class rail fare by the shortest route to the place of destination; and (iii) Where the places of origin of journey and destination or part thereof are not connected by rail and the journey is performed on or after the 1st day of October, 1997, between such places, the amount eligible for exemption shall be:- (A) Where a recognized public transport system exists, an amount not exceeding the 1st class or deluxe class fare, as the case may be, on such transport by the shortest route to the place of destination; and (B) Where no recognised public transport system exists, an amount equivalent to the air-conditioned first class rail fare, for the distance of the journey by the shortest route, as if the journey had been performed by rail. 7. 9. It was submitted that at various ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a circuitous route to the designated place in India. Even in cases where the employee travels outside India during the course of his travel to a place in India, the exemption under section 10(5) is restricted for travel within India. The conditions of travel by economy class, air fare of the national carrier, restriction of exemption to the amount actually incurred, etc. are also complied with. In other words, where the employee has designated a place of travel in India and travels to such a place in India, the benefit of exemption under section 10(5) cannot be denied merely on the ground that a foreign leg is also involved. In view of the above, the Bank is of the view that it has correctly granted exemption under section 10(5) to its employees at the time of deduction of tax at source. 7. 13 In respect of findings of the ld CIT(A) that Rule 2B is very clear in intent that that the said provisions are applicable in connection with proceeding on leave to any place in India and the appellant has in fact bent the interpretation of the said provisions in such a way which goes totally against the intent and spirit of these provisions. In this regard, it was submitted that had the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g guidelines issued by the IBA are framed taking into account the provisions of the Income-tax Act, 1961 and the Income-tax Rules, 1962. The provisions of LTC are governed by the industry level settlement viz. joint Notes , signed by the IBA and the representatives of Officers Organizations after industry level settlement. This is the normal industry practice that has been followed by all public sector banks for several years and it has not been challenged till date. It may be noted that in around approximately 20-25% of the cases of LTC, a foreign leg is involved. In other words, in around 75-80% of cases, there is no foreign leg involved. From a legal perspective as well, as explained above, the bank is of the view that exemption under section 10(5) cannot be denied to employees of a foreign leg is involved as long as the designated place of journey is in India. 7. 16 It was further submitted that Section 192(1) of the Income-tax Act, 1961 provides that any person responsible for paying any income chargeable as salaries shall at the time of payment, deduct income-tax at the rates in force on the estimated income of the assessee. The Bank had honestly and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of the prevalent law and there was no default on the part of the Bank in deducting tax at source. Accordingly, the Bank cannot be held to be an assessee in default within the meaning of section 201. 7. 20. Without prejudice to the above, it was submitted that if at all the LTC payments involving a foreign leg are to be held as taxable, the employee is entitled for exemption under section 10(5) to the extent of expenses incurred for travel in India where the employee s designated place is in India and he actually visits the place as designated. 7. 21 Without prejudice to the above, the Bank submits that if at all the LTC payments are to be held as taxable, the TDS liability of the bank should be computed by applying the actual income-tax rate applicable in case of each employee and not at a flat rate of 30% as considered by the leaned ACIT. 7. 22. Without prejudice to the above, it was submitted that if at all the LTC payments are to be held as taxable and TDS liability is to be computed, the interest on the same should be computed on the basis of actual date of payment of LTC to the employees and not for entire period of 35 months (i. e. from 1 April 2011 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utedly, in the instant case the employees of the assessee have travelled outside India in different foreign countries and raised claim of their expenditure incurred therein. No doubt, the assessee may not be aware with the ultimate plan of travel of its employees, but at the time of settlement of the LTC/LFC bills, complete facts are available before the assessee as to where the employees have travelled, 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. counsel for the assessee during the course of hearing, in which a reference was made to the interim order of the Hon'ble Madras High Court dated 16. 2. 2015. Through the interim order, the Hon'ble Madras High Court has permitted the bankers not to deduct TDS on or after 16. 2. 2015 on the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of employment or even after retirement of service or after termination of service. Reading of section 10(5) of the Act and Rule 2B of the Rules in conjunction lays down the guidelines for claiming exemption in relations to the travel concession received by an employee from his employer or former employer, for proceeding on leave to any place in India. The person is to undertake the journey to any place in India and thereafter return to the place of employment and is entitled to reimbursement of expenditure on such travel between the place of employment and destination in India. Rule 2B of the Rules further lays down the conditions that the amount to be allowed as concession is not to exceed the air economy fair of the National Carrier by the shortest route to the destination in India. The said condition in no way provides that the assessee is at liberty to claim exemption out of his total ticket package spent on his overseas travel and part of the journey being within India. We find no merit in the claim of the assessee in the present case and we are in conformity with the observation of the CIT (Appeals) in this regard, which has been reproduced by us in the paras hereinabove. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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