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TMI Blog2024 (2) TMI 1397X X X X Extracts X X X X X X X X Extracts X X X X ..... f the law, the Ld. AO as well as Ld. CIT(A) erred in raising/confirming the demand of Rs. 1,98,898/- (including interest of Rs. 88,522/-) 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 circumstances of the case and provisions of the law, the Ld AO as well as Ld CIT(A) erred in treating the bank as "assessee in default". 4. That consequential to our Ground No. 1, 2 & 3 above, the learned AO and Ld. CIT(A) erred in charging/confirming interest u/s 201(1A) of Rs. 88,522/." 3. At the outset, both the parties fairly submitted that the only issue in the appeal of the Revenue is "whether TDS is liable to be deducted on the LTC paid to employees or not". 4. Both the parties fairly submitted that the issue is decided in favour of Revenue in assessee's own case by the Hon'ble Supreme Court. We find that the issue is decided by the Hon'ble Supreme Court in the case of SBI Vs. ACIT in Civil Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ees 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 at source from the salary of its employee: "192(1) Any person responsible for paying any income chargeable under the head "Salaries" shall, at the time of payment, deduct income-tax on the amount payable at the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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:- "[Conditions for the purpose of section 10(5). 2B. (1) The amount exempted under clause (5) of section 10 in respect of the value of travel concession or assistance received by or due to the individual from his employer or former employer for himself and his family, in connection with his proceeding,- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 and so was their appeal before the Income Tax Appellate Tribunal. 13. The Delhi High Court vide its order dated 13.01.2020 dismissed the appeal holding that there was no substantial question of law in the Appeal. It was held that the amount received by the employees of the assessee employer towards their LTC claims is not liable for the exemption as these employees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ara 4.3.4 of the 6th 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 employees and encourage its employees towards tourism in India and it is for this reason that reimbursement of LTC was exempted. There was no intention of legislature to allow the employees to travel abroad in the garb of LTC available by virtue of Section 10(5) of the Act. Therefore, the Revenue has a valid objection (apart from other objections which are clearly violative of the Statute), that the inte ..... 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