TMI Blog2024 (2) TMI 919X X X X Extracts X X X X X X X X Extracts X X X X ..... y, the Hon'ble Supreme Court in the case of the assessee STATE BANK OF INDIA VERSUS ASSISTANT COMMISSIONER OF INCOME TAX [ 2022 (11) TMI 426 - SUPREME COURT] affirmed the order of the Hon'ble Delhi High Court in holding that the assessee is liable to deduct tax at source on the payments made to its employees towards LTC bills. In view of the decision of the Hon'ble Supreme Court, the interim stay granted by the Hon'ble Madras High Court is of no help to the assessee bank. Thus we hold that the assessee is in default within the meaning of section 201(1)(1A) of the Act for non-deduction of tax under Section 192 of the Act on the reimbursement of LTC (Leave Travel Concession) /LFC (Leave Fare Concession) and HTC (Home Travel Concession). - SHRI G.S. PANNU, VICE-PRESIDENT AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER For the Appellant : Shri Vivek Gupta, Adv. For the Respondent : Shri Anuj Garg, Sr. DR ORDER PER CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ITA No.5658/Del/2016: Assessment Year: 2013-14: This appeal is filed by the Revenue against the order of Commissioner of Income-Tax (Appeals)-41, New Delhi dated 29.08.2016 fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to deduct TDS on LTC/LFC bills. 3. Learned Departmental Representative submitted that the issue is decided in favour of Revenue in assessee s own case by the Hon'ble Supreme Court . 4. Heard rival contentions, perused the orders of the authorities below. The issue is as to whether the assessee is liable to deduct TDS on the LTC/LFC bills is decided in favour of the Revenue in assessee s own case reported in SBI Vs. DCIT, TDS, Kanpur (2016) 67 taxmann.com 81, Lucknow Tribunal. Following the order of the Tribunal in assessee s own case, the learned Commissioner of Income-Tax (Appeals) held that the assessee is not liable for TDS on the payments made towards LTC/LFC bills observing as under: 4.11 Ground No.3 deals with the application of tax rate at flat 30% by the AO for computation of TDS instead of applying the actual income tax rate applicable in case of each employee. The tax liability u/s 201(1A) is to be calculated as per the tax slabs of each of the deductees. The AO should provide opportunity to the appellant to produce the calculation of tax deduction and charge the tax rate accordingly. 4.12 During the appellate proceeding, the AR of the appellant stated th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Rs. 1,40,387/- 2. That on the facts and circumstances of the case and provisions of the law, the Ld. AO as well as Ld. CIT(A) erred in raising/confirming the demand of Rs. 2,46,021- (including interest of Rs. 1,05,634/-) by denying the exemption u/s 10(5) in respect of reimbursement of Leave Travel concession involving foreign leg through circuitous route as long as the employees designated place is in India for his leave travel concession and he actually visits the place as designated. 3. That without prejudice to ground no.2 above and on the facts and circumstanced of the case and provisions of the law, the Ld. A.O as well as Ld CIT(A) erred in treating the bank as assessee in default 4. That consequential to our Ground nos. 1, 2 3 above, the ld.AO and Ld. CIT(A) erred in charging/confirming interest u/s 201(1A) of Rs. 1,95,634/- 5. That the appellants request be allowed to add, modify and delete any other ground(s) of appeal. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd of Rs. 4,58,483- (including interest of Rs. 73,055/-) by denying the exemption u/s 10(5) in respect of reimbursement of Leave Travel concession involving foreign leg through circuitous route as long as the employees designated place is in India for his leave travel concession and he actually visits the place as designated. 3. That without prejudice to ground nos. 1 and 2 above and on the facts and circumstanced of the case and provisions of the law, the Ld. A.O as well as Ld CIT(A) erred in treating the bank as assessee in default 4. That consequential to our Ground nos. 1, 2 3 above, the ld.AO and Ld. CIT(A) erred in charging/confirming interest u/s 201(1A) of Rs. 73,055/- 5. That the appellants request be allowed to add, modify and delete any other ground(s) of appeal. 8. The assessee in its appeals has raised the afore-mentioned common grounds except for the figures. 9. Heard rival submissions. 10. As could be seen from the above ground, the only issue to be decided is w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vel from one designated place in India to another place within India (though in their travel itinerary a foreign country was also involved), and secondly the payments which were actually made to these employees was for the shortest route of their travel between two designated places within India. In other words, no payment was made for foreign travel though a foreign leg was a part of the itinerary undertaken by these employees. 5. The above reasons given by the appellant-bank however, has not found favour either with the Assistant Commissioner of Income Tax or with the Commissioner of Income Tax (Appeals) or even the High Court. After examining the matter our considered opinion is that the view taken by the Delhi High Court and the Tribunal and even by the revenue in its initiation of proceedings cannot be faulted. The appellant whom we shall refer to as the assessee-employer ought to have deducted tax at source. 6. Let us first go through some of the relevant provisions of the Income Tax Act, 1961 (for short the Act ) and the Income Tax Rules, 1962 framed therein. Let us first take Section 192(1) of the Act which casts a statutory duty on the employer to deduct Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of any travel concession or assistance received by, or due to him, (a) from his employer for himself and his family, in connection with his proceeding on leave to any place in India; (b) from his employer or former employer for himself and his family, in connection with his proceeding to any place in India after retirement from service or after the termination of his service, subject to such conditions as may be prescribed 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 : Provided that the amount exempt under this clause shall in no case exceed the amount of expenses actually incurred for the purpose of such travel: [Explanation 1]. For the purposes of this clause, family , in relation to an individual, means (i) the spouse and children of the individual; and (ii) the parents, brothers and sisters of the individual or any of them, wholly or mainly dependent on the individual. 9. The above provision has to be read along with Rule 2B of Income Tax Rules. Rule 2B reads as under : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led to a foreign country as well, thus taking a circuitous route for their destination which involved a foreign place. The matter was hence examined by the Assessing Officer who was of the opinion that the amount of money received by an employee as LTC is exempted under Section 10(5) of the Act, however, this exemption cannot be claimed by an employee for travel outside India which has been done in this case and therefore the assessee-employer defaulted in not deducting tax at source from this amount claimed by its employees as LTC. There were two violations of the LTC Rules, pointed out by the Assessing Officer: A. The employee did not travel only to a domestic destination but to a foreign country as well and B. The employees had admittedly not taken the shortest possible route between the two destinations thus the Applicant was held to be an assessee in default by the Assessing Officer. 12. The travel undertaken by the employees as LTC was hence in violation of Section 10(5) of the Act read with Rule 2B of the Income Tax Rules, 1962, both of which have been reproduced above. The order of the Assessing Officer was challenged before CIT (A), which was dismissed an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reign travel also frustrates the basic purpose of LTC. The basic objective of the LTC scheme was to familiarise a civil servant or a Government employee to gain some perspective of Indian culture by traveling in this vast country. It is for this reason that the 6th Pay Commission rejected the demand of paying cash compensation in lieu of LTC and also rejected the demand of foreign travel. In para 4.3.4 of the 6 th Pay Commission Report dated March, 2008 this is what was said : 4.3.4. The demand for allowing travel abroad at least once in the entire career under the scheme is not in consonance with the basic objective of the scheme. The Government employee cannot gain any perspective of the Indian culture by traveling abroad. Besides, the attendant cost in foreign travel would also make the expenditure under this scheme much higher. The Commission is, therefore, not inclined to concede the demand to allow foreign travel under LTC. 20. This is also an objection of the Revenue which has been raised in its counter affidavit filed by respondent no. 1-Assistant Commission of Income Tax wherein the Revenue has asserted that the provision for LTC was introduced to motivate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effect that officers/employees would not be entitled to visit Overseas Countries/Centers as part of LTC /HTC. In the interim order passed by the Hon'ble Madras High Court, it has been held that any amount paid to the petitioner towards LTC/reimbursement of LTC pursuant to the impugned order would not amount to income so as to enable the bank to deduct tax at source. We further observed that the Hon'ble Madras High Court in its interim order held that if the writ petition is dismissed, the employees are liable to pay tax on the amount paid by the bank. 14. However, recently, the Hon'ble Supreme Court in the case of the assessee in Civil Appeal No.8181 of 2022 arising out of SLP(C) No.. 9876 of 2020 dated 4.11.2022 affirmed the order of the Hon'ble Delhi High Court in holding that the assessee is liable to deduct tax at source on the payments made to its employees towards LTC bills. In view of the decision of the Hon'ble Supreme Court, the interim stay granted by the Hon'ble Madras High Court is of no help to the assessee bank. Thus, respectfully following the decision of the Hon'ble Supreme Court, we hold that the assessee is in default within the mea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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