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Income Tax Appellate Tribunal, PANAJI BENCH, PANAJI
Before: DR. M. L. MEENA & SHRI ANIKESH BANERJEE
IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER & SHRI ANIKESH BANERJEE, JUDICIAL MEMBER I.T.A. No. 32 to 34/PAN/2018 Assessment Years: 2012-13 to 2014-15 State Bank of India Vs. Income Tax Officer (TDS) Regional Branch Office Belgaum Goaves, Hindwadi Belgaum – 590 011 [AAACS8577K] (Appellant) (Respondent) Appellant by None Respondent by Smt. Rijula Uniyal, Sr. D/R Date of Hearing 28.03.2022 Date of Pronouncement 31.03.2022 ORDER Per Bench: These captioned appeals are filed against the order of the Learned Commissioner of Income Tax (Appeals) - Belagavi, [hereinafter the “ld. CIT(A)] even dt. 08/11/2017, for the Assessment Years 2012-13, 2013-14 & 2014-15, challenging the non-compliance of provisions u/s 201(1)/(1A) of the Income Tax Act, 1961 [hereinafter “the Act’]. 2. Facts in brief are that the appellant/assessee State Bank of India, Regional Business Office is a banking company engaged in the business of banking. A survey u/s 133A of the Act was conducted at the bank premises to verify compliance with TDS/TCS provisions. The ITO held that the assessee has failed to deduct tax at source on the reimbursement made against foreign LTC to the officers of the Bank and accordingly he applied the provisions of Section 201(1) & 201(1A) of the Act treating the assessee in default u/s 201(1) and charged interest u/s 201(1A) of the Act. In respect of the assessment year 2012-13, 2013-14 & 2014-15. 2.1. Aggrieved the assessee preferred an appeal before the ld. CIT(A) who has confirmed the finding of the AO by observing as under:-
2 I.T.A. No. 32 to 34/PAN/2018 Assessment Years: 2012-13 to 2014-15 State Bank of India “7.1 I have carefully considered the arguments put forth by the appellant. Regarding the argument of the assessee that exemption u/s 10(5) is not limited to travel only within India and is applicable to a case involving foreign leg in the tour, it is seen that section 10(5) read with Rule 2B is very clear in intent that the said provisions are applicable in connection with proceeding on leave to any place in India. 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. Assessee reimbursement expenses also included, local travel and incidental expenses which are not covered under LTC scheme of India. In all the cases involving foreign travel, one designated place in India is just covered for namesake, otherwise almost entire journey is a foreign travel for all practical purposes. In these circumstances, exemption u/s 10(5) would not be available. 7.2 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 which is held as under: "12. The said sub-section provides that where an individual had received travel concession or assistance from his employer for proceeding on leave to any place in India, both for himself and his family, then such concession received by the employee is not taxable in the hands of the employee. Similar exemption is allowed to an employee proceeding to any place in India after retirement of service or after the termination of his service. The provisions of the Act are in relation to the travel concession/assistance given for proceeding on leave to any place in India and the said concession is thus exempt only where the employee has utilized the travel concession for travel within India. Further under Rule 2B of the Income Tax Rules the condition for allowing exemption under section 10(5) of the Act are laid down. The conditions are in respect of various modes of transport. However, the basic condition is that the employee is to utilize the travel concession in connection with his proceeding to leave to any place within India, either during the course of employment or even after retirement of service or after termination of service. Reading of section 10(5) of the Act and Rule 28 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
3 I.T.A. No. 32 to 34/PAN/2018 Assessment Years: 2012-13 to 2014-15 State Bank of India in the paras hereinabove. In view thereof, we reject the claim of the assessee of exemption under section 10(5) of the Act. The ground of appeal No. 3 raised by the assessee is thus dismissed." 7.3 Even the judgment of ITAT, Lucknow Bench it is held that there is no exemption available u/s 10(5) in case of travel outside India, and consequently the assessee is in default for not deducting TDS on LTC/LFC payments. Similarly, the decision of the Jaypur Bench order dated 28/03/2017 also supports the case of the Revenue wherein the Jaypur Bench has held as under: 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 travel abroad under the garb of benefit of LTC available by virtue of section 10(5) of the Act. Undisputedly, 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 amount paid/reimbursed to the employees of the bank in respect of LTC/HTC availed where the employee has visited a foreign city/country, irrespective of the fact whether the LFC bills were submitted and paid prior to 16.2.2015 meaning thereby 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 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 Id. CIT(A) has directed the Assessing Officer to recalculate the liability of TDS at 10%.
4 I.T.A. No. 32 to 34/PAN/2018 Assessment Years: 2012-13 to 2014-15 State Bank of India We, therefore, find no infirmity in the order of the ld. CIT(A) and we confirm the same." 8. The facts mentioned in above cases are absolutely similar to the present case. 1, therefore, do not see any reason to deviate from the said view taken by the Jaypur Bench of ITAT. Hence order mad by the ITO (TDS) is in accordance with law and assessee is liable to deduct TDS at applicable rates. Hence I confirm the order of the ITO (TDS) and appeal filed by the appellant is dismissed.”
Further aggrieved, the assessee is in appeal before us. 4. None appeared on behalf of the assessee. However, as per the grounds of appeal, the assessee contends that the assessee Bank’s Regional Office is only a sanctioning authority and not the paying authority and, therefore, it shall not be treated as an assessee in default in compliance of TDS provisions. It is also stated therein that each branch of the bank has separate TAN numbers and such respective branches would take care of their TDS provisions. The Bank is not actually paying the LFC for a foreign country destination. It gives LFC only from the employee’s workplace to the last destination within the country. The employee gives a declaration as to the point from where he is going to the foreign country and so it is not exactly a foreign tour or LFC and as LFC is exempt from tax, the question of TDS default does not arise. In support of his contentions, he placed reliance on the judgment of Hon’ble Apex Court in the case of [2007] 163 Taxman 355 (SC)[16-08- 2007]. Hindustan Coca Cola Beverage (P.) Ltd. vs. Commissioner of Income Tax. He further contended that when the deductee is specifically exempted and included the said income in his return of income, it means that the same has been brought to tax. Merely because he has not paid the taxes it is not correct to disallow the claim. That once the assessee has offered such income it is return, it is sufficient compliance and the decision in the case of Hindustan Coca Cola Beverage (P.) Ltd. (supra) is applicable to the case of the assessee. It is contended that the assessee has paid the travel expenses within India and the destination of journey undertaken was within India only. There has been no re-imbursement of expenses for the journey undertaken outside the country. And, therefore, these expenses are very well covered under the
5 I.T.A. No. 32 to 34/PAN/2018 Assessment Years: 2012-13 to 2014-15 State Bank of India provisions u/s 10(5) of the Act and therefore, the same be considered and the claim be allowed.
Per contra the ld. D/R placed strong reliance on the impugned order of the ld. CIT(A). He contended that as per the provisions of Section 10(5) r.w.r. 2B of the Income Tax Rules, 1962 (hereinafter ‘the Rules’), exemption is limited to claim of expenditure incurred on travel of employees as well as family member to any place in India subject to certain conditions. She contended that the assessee made a wrong interpretation of the said provisions which are totally against the intent and spirit of the provisions as the assesee’s re-imbursement expenses included, local travel and incidental expenses which are not covered under LTC scheme of India. She argued that all the journeys undertaken by the employees were foreign travels for all practical purposes and hence exemption u/s 10(5) of the Act would not be applicable in the case of the assessee. The ld. D/R reiterated the judgments cited and discussed by the ld. CIT(A) while adjudicating the appeal in the impugned order. She concluded her arguments with the submissions that the provisions u/s 10(5) of the Act, provided that reimbursement of travel concession or assistance from his employer for proceeding on leave to any place in India, both for himself and his family members, then such concession received by the employee is not taxable in the hands of the employee. Similar exemption is allowed to an employee proceeding to any place in India after retirement of service or after the termination of his service. Nowhere in the clause it is intended that even if an employee travels to foreign countries, exemption is to limited to the extent of expenditure incurred till the last destination in India. Finally, she submitted that the order of the ld. CIT(A) be sustained.
We have heard rival submission, perused the material available on record, orders of the authorities below as well as case-law cited.
6 I.T.A. No. 32 to 34/PAN/2018 Assessment Years: 2012-13 to 2014-15 State Bank of India 7. The sole issue which arises for our consideration is as to whether the AO was justified in treating the assessee bank as an assessee in default u/s 201(1A) of the Act for short deduction of TDS u/s 201 of the Act and disallowing exemption u/s 10(5) of the Act in respect of reimbursement of LTC/LFC claims of its employees. 8. The issue has been dealt at length by the ld. CIT(A) with the support of various judicial precedents of different Courts & Tribunals (supra). The ITAT Chandigarh Bench in the case of Sh. Om Prakash Gupta vs. ITO (supra) and ITAT Lucknow Bench in the case of State Bank of India, Kanpur vs. ACIT in ITA No.138 to 140/LKW/2015dated04-03-2016, had taken similar view while interpreting the provisions of Section 10(5) of the Act and Rule 2B of the Rules that the basic condition is that an employee has to utilize the Travel concession to leave for any place within India either during the course of employment or even after retirement/termination of service. The Lucknow Bench of the Tribunal has considered the Board’s CBDT Circular wherein reference was made to the interim order of the Hon’ble Madras High Court dt. 16/02/2015 which has been incorporated by the Tribunal holding the assessee in default as the assessee has not deducted TDS intentionally towards expenditure made towards LTC/LFC.
Similarly, the ITAT Bangalore Bench in the case of Syndicate Bank Regional Office-1 vs. ACIT-TDS, Circle-18(2), Bengaluru, in ITA Nos. 1398-1403/Bang/2016 & ITA No. 1435 to 1477/Bang/2016, vide order dt. 06/04/2017 held that u/s 10(5) r.w.s. 192 of the Act and Rule 2B of the Rules, the employees of the Bank who had visited foreign countries by availing LTC/LFC concession will not be entitled for exemption of reimbursement of LTC u/s. 10(5) of the Act and, therefore, the assessee-Bank was under obligation to deduct tax at source treating such an amount as not exempt. The relevant portion of the order is extracted for ready reference:- “7.3 The above narrations are highlighting the contradictions of the assessee's defense. The assessee-Bank had in its grounds of appeal contended that "4.5...........that the appellant bank was under the bona-fide belief that the amount was exempt u/s. 10(5) and as such, the appellant bank cannot be treated as 'an assessee in default' u/s. 201 of the Income-tax Act, 1961". On the contrary, on examination of the case on hand, it is explicit that the assessee
7 I.T.A. No. 32 to 34/PAN/2018 Assessment Years: 2012-13 to 2014-15 State Bank of India bank had not applied its mind while applying the provisions of s.10(5) of the Act with letter and spirit and allowed exemption in a mechanical way. As rightly highlighted by the learned DR in his submissions, the provisions of s. 10(5) of the Act are clear and only the reimbursement of expenses which were incurred on travel of employees and his family to any place in India subject to certain conditions are exempt. Since the employees of the assessee- Bank had travelled to foreign countries, the benefit of exemption available u/s. 10(5) of the Act should not have been granted. We agree that the assessee-Bank may not have been aware of the details of the employees' places or destination of 11 I.T.A. Noss.1398 to 1403/Bang/2016 & 1435 to 1477/Bang/2016 visits at the time of advancement of LTC/LFC amounts. However, at the final settlement of the claims of the employees under LTC/LFC, the assessee-Bank should have obtained all the relevant details such as the places of visits (destinations) etc. When the assessee-Bank was aware of the fact that its employees had visited foreign countries by availing LTC/LFC concession and so he was not entitled for exemption of reimbursement of LTC u/s. 10(5) of the Act, the assessee-Bank was under obligation to deduct tax at source treating such an amount as not exempt. Since the assessee-Bank had failed to enforce its duty to deduct tax at source as envisaged in section s.192 of the Act,, it is tantamount that the assessee-Bank was an 'assessee in default' u/s. 201(1) of the Act and the A.O.(TDS) was within her domain to hold so. Moreover, the assessee-Bank does not have a case that its employees have included the LTC/LFC in their taxable salary and paid tax on the same. Moreover, the national carrier, i.e., Air India/Indian Airlines had also been offering LTC package to various destinations in India and allowing passengers to visit the foreign countries at the full fare chargeable to the final destination in India and it was clearly mentioned in Air India website that the value of LTC was chargeable to Income Tax. …………………… ………………….. 8. As rightly highlighted by the Hon'ble Tribunal, Lucknow Bench (supra) and careful perusal of the provisions of s.10(5) of the Act, we are of the view that the said 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 travel abroad under the garb of benefit of LTC available by virtue of s.10(5) of the Act. However, in the present case the employees of the assessee- Bank have travelled outside India and raised claims of their expenditure incurred therein. There is no dispute that the assessee-Bank may not be aware with the plan of travel of its employees initially, however, at the time of settlement of LTC/LFC bills, the employees should have placed comprehensive details before the assessee-Bank as to where they have travelled/visited and raised the claims, that means to say, the assessee-Bank was well aware of the fact that its employees have travelled in foreign countries too by availing LTC/LFC for which they were not entitled for exemption u/s. 10(5) of the Act. Such being 17 I.T.A. Noss.1398 to 1403/Bang/2016 & 1435 to 1477/Bang/2016 the scenario, the assessee-Bank cannot now plead that it was under the bona-fide belief that the amounts claimed were exempt u/s. 10(5) of the Act. Thus, the Assessing Officer(TDS) was within her domain to term/charge that the assessee- Bank was under obligation to deduct TDS on such payments. Since the assessee- Bank had failed to do so, the A.O.(TDS) had rightly treated the assessee an 'assessee in default' u/s. 201(1) of the Act. 9. The assessee had relied on various case laws for the proposition that its estimate is bona fide and it cannot be held to be an 'assessee in default' u/s. 201(1) of the Act. This contention of the assessee is without legal basis, since the assessee had made no effort to prove how its belief was formed that such foreign travel expenses would come within the ambit of sec. 10(5) of the I.T. Act. Taking into account all the facts and circumstances of the issue as deliberated
8 I.T.A. No. 32 to 34/PAN/2018 Assessment Years: 2012-13 to 2014-15 State Bank of India upon in the fore-going paragraphs and also in conformity with the judicial views (supra), we are of the view that the authorities below were justified in their stand which requires no interference of this Bench. It is ordered accordingly.” 9. The judgment in the case of Hindustan Coca Cola Beverage (P.) Ltd. (supra) is distinguishable on peculiar facts of the instant case. In the present case, the assessee has not filed any corroborative, cogent documentary evidence to prove that the deductee has shown the LTC/LFC amount as receipts, in their returns of income and paid the corresponding tax thereof.
From the above it is evident that the assessee bank’s employee availed LTC/LFC and bills have been settled by the Bank without deducting TDS as required in the provisions of Section 10(5) of the Act. Such being the scenario, the the assessee-Bank cannot now plead that it was under the bona-fide belief that the amounts claimed were exempt u/s. 10(5) of the Act. Thus, the Assessing Officer(TDS) was within his jurisdiction to that the assessee- Bank was under obligation to deduct TDS on such payments. Since the assessee- Bank had failed to do so, the A.O.(TDS) had rightly treated the assessee an 'assessee in default' u/s. 201(1) of the Act and accordingly the ld. CIT(A) was justified in confirming the order of the ld. AO and the same is sustained.
In the result, all these appeals of the assessee are dismissed. Order pronounced in the open court on 31.03.2022
Sd/- Sd/- (Anikesh Banerjee) (Dr. M.L. Meena) Judicial Member Accountant Member Date:- 31/03/2022 SC, Sr.P.S.
9 I.T.A. No. 32 to 34/PAN/2018 Assessment Years: 2012-13 to 2014-15 State Bank of India
Copy of the order forwarded to:
(1)The Appellant:- (2) The Respondent :- (3) The CIT:- (4) The CIT (Appeals):- (5) The DR, I.T.A.T.:-