STATE BANK OF INDIA,MUM vs. ACIT-TDS-2(2),, MUM

PER OM PRAKASH KANT, AM PER OM PRAKASH KANT, AM

The captioned appeals have been filed by the various branches The captioned appeals have been filed by the various branches The captioned appeals have been filed by the various branches of the assessee bank i.e. M/s State Bank of India of the assessee bank i.e. M/s State Bank of India in the capacity of in the capacity of deductor of tax at source ( deductor of tax at source (TDS), challenging the separate orders the separate orders passed by the Ld. Commissioner of Income passed by the Ld. Commissioner of Income-tax (Appeals) tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for various Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for various Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for various respective assessment years respective assessment years in relation to liability raised by the in relation to liability raised by the

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Assessing officer for non Assessing officer for non-deduction of tax at source on foreign leg of ion of tax at source on foreign leg of leave travel concession availed by the employees. leave travel concession availed by the employees.

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First of all, we take up the appeal of the assessee in ITA No. First of all, we take up the appeal of the assessee in ITA No. First of all, we take up the appeal of the assessee in ITA No. 3111/M/2022 for assessment year 2012 3111/M/2022 for assessment year 2012-13(out of first set of out of first set of appeals). The grounds raised by the assessee are reproduced as The grounds raised by the assessee are reproduced as The grounds raised by the assessee are reproduced as under:

The appellant objects to the order of the Commissioner of The appellant objects to the order of the Commissioner of The appellant objects to the order of the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre dated tax (Appeals), National Faceless Appeal Centre dated tax (Appeals), National Faceless Appeal Centre dated 13 October 2022 for AY 2012 13 October 2022 for AY 2012-13 on the following among other 13 on the following among other grounds: Order under section 201(1) and 201(14) barred by limitation Order under section 201(1) and 201(14) barred by limitation Order under section 201(1) and 201(14) barred by limitation 1. The learned CIT(A) erred in not appreciating the The learned CIT(A) erred in not appreciating the The learned CIT(A) erred in not appreciating the provisions of section 201(3) which provide that no order provisions of section 201(3) which provide that no order provisions of section 201(3) which provide that no order can be passed under section 201(1) deeming a person can be passed under section 201(1) deeming a person can be passed under section 201(1) deeming a person to be an assessee in default in respect of payments to to be an assessee in default in respect of payments to to be an assessee in default in respect of payments to residents at any time after the expiry of t residents at any time after the expiry of two years from wo years from the end of the financial year in which the TDS statement the end of the financial year in which the TDS statement the end of the financial year in which the TDS statement is filed. is filed. 2. The learned CIT(A) erred in not appreciating that order The learned CIT(A) erred in not appreciating that order The learned CIT(A) erred in not appreciating that order passed is barred by limitation as the impugned order passed is barred by limitation as the impugned order passed is barred by limitation as the impugned order was passed after the expiry of two years from the end was passed after the expiry of two years from the end was passed after the expiry of two years from the end of the f of the financial year in which the TDS statement is filed inancial year in which the TDS statement is filed i.e., 31 March 2014 (for quarter 1 to 3) and 31 March i.e., 31 March 2014 (for quarter 1 to 3) and 31 March i.e., 31 March 2014 (for quarter 1 to 3) and 31 March 2015 (for quarter 4) and hence is void ab initio. 2015 (for quarter 4) and hence is void ab initio. 2015 (for quarter 4) and hence is void ab initio. Validity of Proceedings Validity of Proceedings 3. Without prejudice to the above, the learned CIT(A) erred Without prejudice to the above, the learned CIT(A) erred Without prejudice to the above, the learned CIT(A) erred in not appreciati in not appreciating that Order passed under section ng that Order passed under section 201(1) or (14) cannot be passed holding the Bank (i.e., 201(1) or (14) cannot be passed holding the Bank (i.e., 201(1) or (14) cannot be passed holding the Bank (i.e., payer) to be an assessee payer) to be an assessee-in-default where the tax default where the tax authorities have not taken any action against the payee authorities have not taken any action against the payee authorities have not taken any action against the payee (i.e., the employee in the instant case). Further, the time (i.e., the employee in the instant case). Further, the time (i.e., the employee in the instant case). Further, the time limit for taking action against the payee under section limit for taking action against the payee under section limit for taking action against the payee under section 147 of the Income 147 of the Income-tax Act, 1961 (i.e., by 31 March 2019) tax Act, 1961 (i.e., by 31 March 2019) has also lapsed and hence, the subject proceedings has also lapsed and hence, the subject proceedings has also lapsed and hence, the subject proceedings under section 201 are invalid and barred by limitation. under section 201 are invalid and barred by limitation. under section 201 are invalid and barred by limitation. Condonation of delay Condonation of delay 4. The learned The learned CIT(A) erred in not granting condonation of CIT(A) erred in not granting condonation of delay in filing of appeal of 249 days to the Appellant delay in filing of appeal of 249 days to the Appellant delay in filing of appeal of 249 days to the Appellant without appreciating without appreciating the facts of the case the facts of the case the facts of the case. the case. Opportunity of being heard Opportunity of being heard

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is not an assessee in default as contemplated under is not an assessee in default as contemplated under is not an assessee in default as contemplated under Section 201(1). Section 201(1). 10. The learned CIT(A) erred in not appreciating that The learned CIT(A) erred in not appreciating that once the prescribed conditions as per Rule 2B for once the prescribed conditions as per Rule 2B for once the prescribed conditions as per Rule 2B for eligibility are sati eligibility are satisfied and in the absence of any sfied and in the absence of any specific bar on travel to a foreign destination during the specific bar on travel to a foreign destination during the specific bar on travel to a foreign destination during the course of travel to a place in India under section 10(5) course of travel to a place in India under section 10(5) course of travel to a place in India under section 10(5) there was no default under section 201 with respect to there was no default under section 201 with respect to there was no default under section 201 with respect to application of TDS. application of TDS. 11. The learned CIT(A) erred in not appreciating that not appreciating that the action of the appellant of not deducting tax on the action of the appellant of not deducting tax on the action of the appellant of not deducting tax on reimbursement of LFC involving foreign leg is in reimbursement of LFC involving foreign leg is in reimbursement of LFC involving foreign leg is in accordance with annual Circular on TDS from salaries accordance with annual Circular on TDS from salaries accordance with annual Circular on TDS from salaries for FY 2013 for FY 2013-14 (i.e., Circular No. 8/2013 dated 10 14 (i.e., Circular No. 8/2013 dated 10 October 2013) wherein it has October 2013) wherein it has been clarified that where been clarified that where the journey is performed in a circuitous route, the the journey is performed in a circuitous route, the the journey is performed in a circuitous route, the exemption is limited to what is admissible by the exemption is limited to what is admissible by the exemption is limited to what is admissible by the shortest route. Likewise, where the journey is performed shortest route. Likewise, where the journey is performed shortest route. Likewise, where the journey is performed in a circular form touching different places, the in a circular form touching different places, the in a circular form touching different places, the exemption is limited exemption is limited to what is admissible for the to what is admissible for the journey from the place of origin to the farthest point journey from the place of origin to the farthest point journey from the place of origin to the farthest point reached in India, by the shortest route. reached in India, by the shortest route. Bona fide belief Bona fide belief 12. The learned CIT(A) erred in not adjudicating and The learned CIT(A) erred in not adjudicating and appreciating that the appellant was of the bona fide appreciating that the appellant was of the bona fide appreciating that the appellant was of the bona fide belief that it was not liable to deduct tax at source in f that it was not liable to deduct tax at source in f that it was not liable to deduct tax at source in respect of LFC reimbursements provided to employees respect of LFC reimbursements provided to employees respect of LFC reimbursements provided to employees and accordingly, the appellant cannot be held to be an and accordingly, the appellant cannot be held to be an and accordingly, the appellant cannot be held to be an assessee in default within the meaning of section 201. assessee in default within the meaning of section 201. assessee in default within the meaning of section 201. 13. The learned CIT(A) erred in not appreciating that The learned CIT(A) erred in not appre in terms of section 192 once an employer has honestly in terms of section 192 once an employer has honestly in terms of section 192 once an employer has honestly and fairly formed an opinion and arrived at the and fairly formed an opinion and arrived at the and fairly formed an opinion and arrived at the estimated taxable income and applied TDS accordingly, estimated taxable income and applied TDS accordingly, estimated taxable income and applied TDS accordingly, it cannot be considered as an assessee in default. it cannot be considered as an assessee in default. it cannot be considered as an assessee in default. 14. The learned CIT(A) erred in not appreciating that The learned CIT(A) erred in not appreciating that section 192 contemplates deduction only in cases where section 192 contemplates deduction only in cases where section 192 contemplates deduction only in cases where the salary accrues and the same is paid to an the salary accrues and the same is paid to an the salary accrues and the same is paid to an employee; in other words, accrual as well as payment employee; in other words, accrual as well as payment employee; in other words, accrual as well as payment must co must co-exist in order to attract the provisions of exist in order to attract the provisions of Section 192 as is also held in (2001) SCC OnLine AP 886). 192 as is also held in (2001) SCC OnLine AP 886). 192 as is also held in (2001) SCC OnLine AP 886). 15. The learned CIT(A) also erred in not appreciating The learned CIT(A) also erred in not appreciating that the annual Circular on TDS from salaries for FY that the annual Circular on TDS from salaries for FY that the annual Circular on TDS from salaries for FY 2013-14 (Circular No. 8/2013 dated 10 October 2013) 14 (Circular No. 8/2013 dated 10 October 2013) 14 (Circular No. 8/2013 dated 10 October 2013)

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only requires that the employer to be only requires that the employer to be satisfied that the satisfied that the amount reimbursed towards LTC is exempt under amount reimbursed towards LTC is exempt under amount reimbursed towards LTC is exempt under section 10(5) and preserve evidence in respect thereof section 10(5) and preserve evidence in respect thereof section 10(5) and preserve evidence in respect thereof thus evidencing that only satisfaction that income under thus evidencing that only satisfaction that income under thus evidencing that only satisfaction that income under section 10(5) is exempt is required from the employer. section 10(5) is exempt is required from the employer. section 10(5) is exempt is required from the employer. Incentive provisions ar Incentive provisions are to be construed liberally e to be construed liberally 16. Without prejudice to the above, the learned CIT(A) Without prejudice to the above, the learned CIT(A) erred in not appreciating that when the Legislature erred in not appreciating that when the Legislature erred in not appreciating that when the Legislature brings in the statute an incentive provision for the brings in the statute an incentive provision for the brings in the statute an incentive provision for the encouragement or advancement of a specific purpose, encouragement or advancement of a specific purpose, encouragement or advancement of a specific purpose, activity or obj activity or objective, then such provision has to be ective, then such provision has to be liberally interpreted so as to advance the purpose liberally interpreted so as to advance the purpose liberally interpreted so as to advance the purpose behind it. behind it. 17. The learned CIT(A) thus erred in not appreciating The learned CIT(A) thus erred in not appreciating that incentive provision like section 10(5) should be that incentive provision like section 10(5) should be that incentive provision like section 10(5) should be construed in a liberal and purposive manner, meaning construed in a liberal and purposive manner, me construed in a liberal and purposive manner, me thereby that the Assessing Officer, in such cases, thereby that the Assessing Officer, in such cases, thereby that the Assessing Officer, in such cases, should adopt a liberal and broad should adopt a liberal and broad-minded approach, so minded approach, so as to fulfill the objective of the legislation and not in a as to fulfill the objective of the legislation and not in a as to fulfill the objective of the legislation and not in a manner as to snatch away the benefit intended to be manner as to snatch away the benefit intended to be manner as to snatch away the benefit intended to be given by the Legislature. given by the Legislature. Interpretation favorable to the appellant to be adopted Interpretation favorable to the appellant to be adopted Interpretation favorable to the appellant to be adopted 18. Without prejudice to the above, the learned CIT(A) Without prejudice to the above, the learned CIT(A) erred in not appreciating that it is a well settled erred in not appreciating that it is a well settled erred in not appreciating that it is a well settled principle in law that if two views are possible then the principle in law that if two views are possible then the principle in law that if two views are possible then the view which is favorable to the appe view which is favorable to the appellant is to be llant is to be adopted. Thus, the learned CIT(A) erred in not accepting adopted. Thus, the learned CIT(A) erred in not accepting adopted. Thus, the learned CIT(A) erred in not accepting the favorable view that LFC reimbursements, involving the favorable view that LFC reimbursements, involving the favorable view that LFC reimbursements, involving foreign leg restricted only to designated place India foreign leg restricted only to designated place India foreign leg restricted only to designated place India portion is not taxable under section 10(5) read with Rule portion is not taxable under section 10(5) read with Rule portion is not taxable under section 10(5) read with Rule 2B. Exemption for Exemption for Indian leg 19. Without prejudice to the above, the learned CIT(A) Without prejudice to the above, the learned CIT(A) erred in not adjudicating and appreciating that if at all erred in not adjudicating and appreciating that if at all erred in not adjudicating and appreciating that if at all the LFC payments involving a foreign leg are to be held the LFC payments involving a foreign leg are to be held the LFC payments involving a foreign leg are to be held as taxable, the employee is entitled for exemption under as taxable, the employee is entitled for exemption under as taxable, the employee is entitled for exemption under section 10(5) to section 10(5) to the extent of expenses incurred for the extent of expenses incurred for travel in India where the employee's designated place is travel in India where the employee's designated place is travel in India where the employee's designated place is in India and he actually visits the designated place in in India and he actually visits the designated place in in India and he actually visits the designated place in India. India. Tax Rate and Interest under section 201(1A) Tax Rate and Interest under section 201(1A) Tax Rate and Interest under section 201(1A) 20. Without prejudice to the above, the learned CIT(A) Without prejudice to the above, the learned CIT(A) erred in upholding the action of the TDS Officer of erred in upholding the action of the TDS Officer of erred in upholding the action of the TDS Officer of

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applying a flat rate of 30% for computation of TDS applying a flat rate of 30% for computation of TDS applying a flat rate of 30% for computation of TDS instead instead instead of of of applying applying applying the the the actual actual actual income-tax income income rate applicable in the case of the employee and in computing applicable in the case of the employee and in computing applicable in the case of the employee and in computing interest under section 201(1A) for the actual period of interest under section 201(1A) for the actual per interest under section 201(1A) for the actual per default. default. 4. Briefly stated, facts of the case Briefly stated, facts of the case as culled out from the order of as culled out from the order of lower authorities and submission of the assessee are that the lower authorities and submission of the assessee lower authorities and submission of the assessee Human Resource Management Service (HRMS) branch of the State Human Resource Management Service (HRMS) branch of the State Human Resource Management Service (HRMS) branch of the State Bank of India, Mumbai was undertaking the processing work of Bank of India, Mumbai was undertaking the proces Bank of India, Mumbai was undertaking the proces salary/pension and perquisites excluding leave travel concession of salary/pension and perquisites excluding leave travel concession of salary/pension and perquisites excluding leave travel concession of employees and pensioner employees and pensioner of SBI Bank. The said Department of SBI Bank. The said Department handled the salary of the State Bank of India for a time span for 3 handled the salary of the State Bank of India for a time span for 3 handled the salary of the State Bank of India for a time span for 3 years i.e. financial year 2009 financial year 2009-10 to financial year 2011 r 2011-12. The HRMS HRMS HRMS Department Department Department had had had discontinued discontinued discontinued the the the Centralized Centralized Centralized TDS TDS TDS compliance after 31.03.2012. compliance after 31.03.2012. The Assessing Officer observed that The Assessing Officer observed that the employees of assessee availed leave travel concession (LTC) for the employees of assessee availed leave travel concession the employees of assessee availed leave travel concession the travel between two places located in India via a place in foreign the travel between two places located in India via a pl the travel between two places located in India via a pl country and claimed the LTC allowance as exempted u/s 10(5) of country and claimed the LTC allowance as exempted u/s 10(5) of country and claimed the LTC allowance as exempted u/s 10(5) of the Act. It is the contention of the Assessing Officer that assessee in It is the contention of the Assessing Officer that assessee in It is the contention of the Assessing Officer that assessee in view of capacity of a deductor tax at source has not deducted tax at view of capacity of a deductor tax at source has not deducted tax at view of capacity of a deductor tax at source has not deducted tax at source in respect leave travel conces leave travel concession containing foreign leg containing foreign leg, which is not exempted under the provisions of the Act. The assessee which is not exempted under the provisions of the Act. which is not exempted under the provisions of the Act. bank submitted that bank submitted that it was under bonafide belief that even when it was under bonafide belief that even when the journey undertaken by an employee involves a foreign leg, the journey undertaken by an employee involves a foreign the journey undertaken by an employee involves a foreign employee was entitled to exemptio employee was entitled to exemption under section 10(5) n under section 10(5) of the Act, when the employee’s designated place is in when the employee’s designated place is in India and he actually and he actually

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visits the designated places. visits the designated places. In view of non-deduction of tax at deduction of tax at source on the relevant relevant leave travel concession leave travel concession amount, the Assessing Officer raised liability u/s 201(1)/201(1A) of the Act, Assessing Officer raised liability u/s 201(1)/201(1 Assessing Officer raised liability u/s 201(1)/201(1 observing as under:

“3. The Assessee vide this show cause notice, was asked to The Assessee vide this show cause notice, was asked to The Assessee vide this show cause notice, was asked to furnish the list the employees who claimed LAC and had also furnish the list the employees who claimed LAC and had also furnish the list the employees who claimed LAC and had also undertaken foreign tour along with amount of L undertaken foreign tour along with amount of LFC and TDS if FC and TDS if any deducted on such payments and to justify that in case of any deducted on such payments and to justify that in case of any deducted on such payments and to justify that in case of son-deduction of TDS why it should not be treated as assessee deduction of TDS why it should not be treated as assessee deduction of TDS why it should not be treated as assessee in default. The details of LFC Paid to the employees during the FY The details of LFC Paid to the employees during the FY The details of LFC Paid to the employees during the FY 2011-12, AY 2012-13 S No. Name Name of of the the Description of Amount of LFC Amount of LFC Date of grant of employee s/Shri Shri the route granted granted to to the the LFC travelled employees (Rs.) employees (Rs.) 1. Balachandran C (BM) Balachandran C (BM) Bankok, Singapore 2,98,896 01/04/2011 01/04/2011 2. Balakrishnan P Balakrishnan P Doha Geneva, 2,93,432 Paris 01/04/2011 3. C C Subhaschandran Subhaschandran Doha Zurich and 2,23,572 (BM) Paris 01/04/2011 4. Chacko M J (BM) Chacko M J (BM) Doha Zurich and 2,23,588 Paris 01/04/2011 5. Durgadas AP (BM) Durgadas AP (BM) Bankok, Singapore 2,58396 01/04/2011 6. K Pankajakshan (DM) K Pankajakshan (DM) Thailand Malaysia 2,79,940 and Singapore 01/04/2011 7. K V Mohandas K V Mohandas Doha Zurich and 1,98,215 Paris 01/04/2011 8. P k Rajendran P k Rajendran Malaysia and 2,93,192 Singapore 01/04/2011 9. P K Sasikumar (BM) P K Sasikumar (BM) Doha Zurich and 2,23,572 Paris 01/04/2011 10. Pradeep Menon Pradeep Menon Doha Zurich and 2,44,378 Paris 01/04/2011 11. Premanandan KK Premanandan KK Thailand Malaysia 2,09,613 and Singapore 12. Rameshan P (BM) Rameshan P (BM) Columbo, 2,29,640 01/04/2011 KaulaLampur, Singapore 13. Shamshad Shamshad Begam Begam Bahrain Heathrow 2,20,374 01/04/2011 (BM) and London 14. Sreedharan PK (BM) Sreedharan PK (BM) Doha Zurich and 2,24,478 01/04/2011 Paris 15. V V P P Raguthaman Raguthaman Doha Zurich and 2,31,656 01/04/2011 (CM) Paris 16. V P Snehaprakarshan V P Snehaprakarshan Bangkok, 2,98,896 01/04/2011 (BM) Singapore

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“6.7 Meanwhile, the issue has been decided by the 6.7 Meanwhile, the issue has been decided by the 6.7 Meanwhile, the issue has been decided by the Honble' Karnataka HC in the case of Karnataka HC in the case of SBI Vs ACIT(TDS) SBI Vs ACIT(TDS) vide order dated 17-12 12-2021 138 taxmann.com 102 where it has been 2021 138 taxmann.com 102 where it has been held that Leave travel concession is available for an employee held that Leave travel concession is available for an employee held that Leave travel concession is available for an employee to proceed on leave to any place in India and thereafter return to proceed on leave to any place in India and thereafter return to proceed on leave to any place in India and thereafter return to place of origin in shortest route but witho to place of origin in shortest route but without a foreign leg, ut a foreign leg, hence, where employees of assessee hence, where employees of assessee-bank reached destination, bank reached destination, place in India after taking a foreign tour, they would not be place in India after taking a foreign tour, they would not be place in India after taking a foreign tour, they would not be entitled to claim reimbursement as per section 10(5) read with entitled to claim reimbursement as per section 10(5) read with entitled to claim reimbursement as per section 10(5) read with rule 2B and authorities had rightly held assessee to rule 2B and authorities had rightly held assessee to rule 2B and authorities had rightly held assessee to be an 'assessee in default under section 201 (1). 'assessee in default under section 201 (1). 6.8In view of above and respectfully following the decision of 6.8In view of above and respectfully following the decision of 6.8In view of above and respectfully following the decision of the Honble HC, the contentions of the appellant are not the Honble HC, the contentions of the appellant are not the Honble HC, the contentions of the appellant are not sustainable. Hence, the order of the AO is upheld. In the result, sustainable. Hence, the order of the AO is upheld. In the result, sustainable. Hence, the order of the AO is upheld. In the result, the appeal of the ap the appeal of the appellant is dismissed.” 6. Before us, the Ld. Counsel of the assessee submitted that the Before us, the Ld. Counsel of the assessee submitted that the Before us, the Ld. Counsel of the assessee submitted that the delay in filing appeal before the Ld. CIT(A) was on account of delay in filing appeal before the Ld. CIT(A) was on account of delay in filing appeal before the Ld. CIT(A) was on account of collecting data from the collecting data from the Thiruvananthapuram Circle of the State Thiruvananthapuram Circle of the State Bank of India to which the 25 employees Bank of India to which the 25 employees belonged, since elonged, since non- deduction of tax at source on the leave travel concession pertained deduction of tax at source on the leave travel concession pertain deduction of tax at source on the leave travel concession pertain to those employees. The Ld Counsel further submitted that . The Ld Counsel further submitted that the . The Ld Counsel further submitted that assessee being a public sector assessee being a public sector undertaking and being and being in post covid period, it took time in time in collecting said information, which has , which has caused delay in filing the appeal for delay in filing the appeal for a period of 249 days. According to the 249 days. According to the Ld. Counsel there was a no malafide intention and delay was due to Ld. Counsel there was a no malafide intention and delay was due to Ld. Counsel there was a no malafide intention and delay was due to bonafide reasons therefore, the Ld. CIT(A) might be directed to bonafide reasons therefore, the Ld. CIT(A) might be directed to bonafide reasons therefore, the Ld. CIT(A) might be directed to admit the appeal and deci admit the appeal and decide the issue on merit after taking into de the issue on merit after taking into consideration submission of the assessee. consideration submission of the assessee.

6.1 Without prejudice, the Ld. Counsel of the assessee submitted Without prejudice, the Ld. Counsel of the assessee submitted Without prejudice, the Ld. Counsel of the assessee submitted that the HRMS Department had performed the activities of that the HRMS Department had performed the activities of that the HRMS Department had performed the activities of

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processing of regular salary/payments to its employees whereas of regular salary/payments to its employees whereas of regular salary/payments to its employees whereas concessional and specific payment of the employees such as leave concessional and specific payment of the employees such as leave concessional and specific payment of the employees such as leave fair concession/leave travel concession were fair concession/leave travel concession were entrusted entrusted to the respective branches as per the policy of State Bank of India. respective branches as per the policy of State Bank of India. respective branches as per the policy of State Bank of India. Therefore, according to him, in the circumstances SBI HRMS was ording to him, in the circumstances SBI HRMS was ording to him, in the circumstances SBI HRMS was not responsiblefor deduction of responsiblefor deduction of tax at source on leave travel on leave travel concession as those payments have not been made by the HRMS as those payments have not been made by the HRMS as those payments have not been made by the HRMS branch. He submitted that it is . He submitted that it is the‘Thiruvananthapuram Thiruvananthapuram’ Branch of the SBI, which was responsible for deducting tax at source on leave responsible for deducting tax at source on leave responsible for deducting tax at source on leave travel concession.

6.2 The Ld. Counsel without prejudice The Ld. Counsel without prejudice, further submitted that the further submitted that the “payees” have already paid tax on the said have already paid tax on the said amount amount of the leave travel concession and therefore, invoking first proviso to section travel concession and therefore, invoking first proviso to travel concession and therefore, invoking first proviso to 201(1) of the Act, the assessee seeks to file a certificate from an the assessee seeks to file a certificate from an the assessee seeks to file a certificate from an accountant in the prescribed form so as to be excluded from accountant in the prescribed form so as to be excluded from accountant in the prescribed form so as to be excluded from definition of the “assessee in default assessee in default” and resultant liability u/w ” and resultant liability u/w 201(1) and 201(1A) of the Act. 201(1) and 201(1A) of the Act. The Ld. Counsel subm The Ld. Counsel submitted that matter may be remitted back either to the Assessing Officer or to matter may be remitted back either to the Assessing Officer or to matter may be remitted back either to the Assessing Officer or to the Ld. CIT(A).

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viewof the decision of viewof the decision of Hon’ble supreme Court in the case of supreme Court in the case of State Bank of India Vs Assi Assistant Commissioner of income Commissioner of income-tax (2022) 144 taxmann.com 131(SC) 144 taxmann.com 131(SC).

8.1 As far as taxability of the LTC containing foreign As far as taxability of the LTC containing foreign As far as taxability of the LTC containing foreign leg is the ITAT G bench in decision in the case of State bank concerned, the ITAT G bench in decision in the case of the ITAT G bench in decision in the case of of India Vs Assistant Commissioner of Income of India Vs Assistant Commissioner of Income-tax, TDS (2021) tax, TDS (2021) 123 taxmann.com 447 (Mumbai 123 taxmann.com 447 (Mumbai-Trib) allowed in favour of the in favour of the assess observing as under: assess observing as under:

“8. A plain reading of the above provi 8. A plain reading of the above provisions does not indicate sions does not indicate any requirement of taking the shortest route for travelling to any requirement of taking the shortest route for travelling to any requirement of taking the shortest route for travelling to "any place in India" or putting any kind of restrictions the route "any place in India" or putting any kind of restrictions the route "any place in India" or putting any kind of restrictions the route to be adopted for going to such a destination. Quite to the to be adopted for going to such a destination. Quite to the to be adopted for going to such a destination. Quite to the contrary, the statutory provisions do envi contrary, the statutory provisions do envisage the possibilities sage the possibilities of someone taking a route other than the shortest route, as is of someone taking a route other than the shortest route, as is of someone taking a route other than the shortest route, as is implicit in the restriction that "an amount not exceeding the air implicit in the restriction that "an amount not exceeding the air implicit in the restriction that "an amount not exceeding the air economy fare of the national carrier by the shortest route to the economy fare of the national carrier by the shortest route to the economy fare of the national carrier by the shortest route to the place of destination" will only be eli place of destination" will only be eligible for exemption under gible for exemption under

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section 10(5). What is essentially implies, to give a simple section 10(5). What is essentially implies, to give a simple section 10(5). What is essentially implies, to give a simple example, is that if someone is based in Mumbai and he decides example, is that if someone is based in Mumbai and he decides example, is that if someone is based in Mumbai and he decides to go to Delhi via, let us say, Lucknow, Kolkata, or Chennai, the to go to Delhi via, let us say, Lucknow, Kolkata, or Chennai, the to go to Delhi via, let us say, Lucknow, Kolkata, or Chennai, the amount admissible for exemption under sec amount admissible for exemption under section 10(5) will be tion 10(5) will be restricted to the price of direct flights between Mumbai and restricted to the price of direct flights between Mumbai and restricted to the price of direct flights between Mumbai and Delhi on the national carrier. This proposition is not even Delhi on the national carrier. This proposition is not even Delhi on the national carrier. This proposition is not even disputed by the income tax department. The question, however, disputed by the income tax department. The question, however, disputed by the income tax department. The question, however, arises whether when the same person goes to Delhi, via arises whether when the same person goes to Delhi, via arises whether when the same person goes to Delhi, via Dubai, the exempt leave travel concession being restricted to the price the exempt leave travel concession being restricted to the price the exempt leave travel concession being restricted to the price of Mumbai Delhi direct flight. Of course, the stand of the income of Mumbai Delhi direct flight. Of course, the stand of the income of Mumbai Delhi direct flight. Of course, the stand of the income tax department is that even the cost of the direct flight from tax department is that even the cost of the direct flight from tax department is that even the cost of the direct flight from Mumbai to Delhi, on the national carrier Mumbai to Delhi, on the national carrier- assuming tha assuming that it is less than Mumbai less than Mumbai-Dubai-Delhi airfare, will not be admissible Delhi airfare, will not be admissible leave travel assistance exemption in such a case. That is the leave travel assistance exemption in such a case. That is the leave travel assistance exemption in such a case. That is the approach approved by the coordinate benches as well, and, approach approved by the coordinate benches as well, and, approach approved by the coordinate benches as well, and, therefore, we need not question that at this stage. The relevant therefore, we need not question that at this stage. The relevant therefore, we need not question that at this stage. The relevant question, however, is not the actual status of taxation; the estion, however, is not the actual status of taxation; the estion, however, is not the actual status of taxation; the relevant question iswhether the assessee employer could be relevant question iswhether the assessee employer could be relevant question iswhether the assessee employer could be said to unreasonable or malafide in proceeding on the basis said to unreasonable or malafide in proceeding on the basis said to unreasonable or malafide in proceeding on the basis that in such a situation also, the cost of a direct flight between that in such a situation also, the cost of a direct flight between that in such a situation also, the cost of a direct flight between Mumbai Delh Mumbai Delhi on national airlines will be available for i on national airlines will be available for exemption under section 10(5). When we look at the detailed exemption under section 10(5). When we look at the detailed exemption under section 10(5). When we look at the detailed statement of facts, extracts from which have been extensively statement of facts, extracts from which have been extensively statement of facts, extracts from which have been extensively reproduced by us earlier in this order, we do not find anything reproduced by us earlier in this order, we do not find anything reproduced by us earlier in this order, we do not find anything wrong or unreasonable in wrong or unreasonable in the conduct of the assessee the conduct of the assessee employer. There is no specific bar in the law on the travel, employer. There is no specific bar in the law on the travel, employer. There is no specific bar in the law on the travel, eligible for exemption under section 10(5), involving a sector of eligible for exemption under section 10(5), involving a sector of eligible for exemption under section 10(5), involving a sector of overseas travel, and, in the absence of such a bar, the overseas travel, and, in the absence of such a bar, the overseas travel, and, in the absence of such a bar, the assessee employer cannot be faulted for not i assessee employer cannot be faulted for not inferring such a nferring such a bar. The reimbursement is restricted to airfare, on the national bar. The reimbursement is restricted to airfare, on the national bar. The reimbursement is restricted to airfare, on the national carrier, by the shortest route carrier, by the shortest route- as is the mandate of rule 2B. The as is the mandate of rule 2B. The employee has actually travelled, as a part of that composite employee has actually travelled, as a part of that composite employee has actually travelled, as a part of that composite itinerary involving a foreign sector as well, to itinerary involving a foreign sector as well, to the destination in the destination in India. The guidance available to the assessee employer India. The guidance available to the assessee employer India. The guidance available to the assessee employer indicates that, in such a situation, the exemption under section indicates that, in such a situation, the exemption under section indicates that, in such a situation, the exemption under section 10(5) is available to the employee 10(5) is available to the employee- though to the extent of though to the extent of farthest Indian destination by the shortest route, and t farthest Indian destination by the shortest route, and t farthest Indian destination by the shortest route, and that is what the assessee employer has allowed. In the light of this what the assessee employer has allowed. In the light of this what the assessee employer has allowed. In the light of this analysis of the legal position and the factual backdrop, analysis of the legal position and the factual backdrop, analysis of the legal position and the factual backdrop, whatever may be the position with respect of taxability of such whatever may be the position with respect of taxability of such whatever may be the position with respect of taxability of such a leave travel concession in the hands of the employee, the a leave travel concession in the hands of the employee, the a leave travel concession in the hands of the employee, the assessee employer cannot be faulted for not deducting tax at e employer cannot be faulted for not deducting tax at e employer cannot be faulted for not deducting tax at source from the leave travel concession facility allowed by him source from the leave travel concession facility allowed by him source from the leave travel concession facility allowed by him

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to the employees. As we hold so, we may add that we have not to the employees. As we hold so, we may add that we have not to the employees. As we hold so, we may add that we have not really addressed ourselves to the larger question with respect really addressed ourselves to the larger question with respect really addressed ourselves to the larger question with respect to the actual to the actual taxability of this leave travel concession in the taxability of this leave travel concession in the hands of the employees concerned, even though we have our hands of the employees concerned, even though we have our hands of the employees concerned, even though we have our prima facie reservations on the coordinate benches decisions prima facie reservations on the coordinate benches decisions prima facie reservations on the coordinate benches decisions holding taxability of these amounts in the hands of the holding taxability of these amounts in the hands of the holding taxability of these amounts in the hands of the employees concerned, because th employees concerned, because that aspect of the matter is not at aspect of the matter is not really relevant as on now. We leave it at that for the time being. really relevant as on now. We leave it at that for the time being. really relevant as on now. We leave it at that for the time being. The coordinate bench decisions deal with only the issue of The coordinate bench decisions deal with only the issue of The coordinate bench decisions deal with only the issue of taxability of leave travel facility under section 10(5) and not taxability of leave travel facility under section 10(5) and not taxability of leave travel facility under section 10(5) and not with the broader question about the with the broader question about the nature of tax deduction at nature of tax deduction at source liability under section 192, as also the issue about source liability under section 192, as also the issue about source liability under section 192, as also the issue about bonafides of the stand of the assessee employer. These bonafides of the stand of the assessee employer. These bonafides of the stand of the assessee employer. These decisions, therefore, do not come in the way of our present decisions, therefore, do not come in the way of our present decisions, therefore, do not come in the way of our present decision. Once we hold, as we do in this case, that e decision. Once we hold, as we do in this case, that e decision. Once we hold, as we do in this case, that estimation of income, in the hands of the employees under the head' of income, in the hands of the employees under the head' of income, in the hands of the employees under the head' income from salaries', by the employer was bonafide and income from salaries', by the employer was bonafide and income from salaries', by the employer was bonafide and reasonable, the very foundation of impugned demands raised reasonable, the very foundation of impugned demands raised reasonable, the very foundation of impugned demands raised under section 201 r.w.s 192 ceases to hold good in law. We under section 201 r.w.s 192 ceases to hold good in law. We under section 201 r.w.s 192 ceases to hold good in law. We must, therefore must, therefore, vacate these demands.” 8.2 However, The Hon’ble Supreme Court in the case of However, The Hon’ble Supreme Court in the case of However, The Hon’ble Supreme Court in the case of State Bank of India Vs Assistant Commissioner of Income of India Vs Assistant Commissioner of Income-tax (supra) of India Vs Assistant Commissioner of Income held the LTC with foreign leg held the LTC with foreign leg is taxable observing as under: s taxable observing as under:

“8. These proceedings started with a Spot 8. These proceedings started with a Spot 8. These proceedings started with a Spot Verification under Section 133A Section 133A when it was discerned by the Revenue when it was discerned by the Revenue that some of the employees of the assessee that some of the employees of the assessee- employer had employer had claimed LTC even for their travel to places outside India. These claimed LTC even for their travel to places outside India. These claimed LTC even for their travel to places outside India. These employees, eve employees, even though, raised a claim of their travel expenses n though, raised a claim of their travel expenses between two points within India but between the two points between two points within India but between the two points between two points within India but between the two points they had also travelled to a foreign country as well, thus taking they had also travelled to a foreign country as well, thus taking they had also travelled to a foreign country as well, thus taking a circuitous route for their destination which involved a foreign a circuitous route for their destination which involved a foreign a circuitous route for their destination which involved a foreign place. The matt place. The matter was hence examined by the Assessing Officer er was hence examined by the Assessing Officer who was of the opinion that the amount of money received by who was of the opinion that the amount of money received by who was of the opinion that the amount of money received by an employee as LTC is exempted under an employee as LTC is exempted under Section 10(5) Section 10(5) of the Act, however, this exemption cannot be c Act, however, this exemption cannot be claimed by an employee laimed by an employee for travel outside India which has been done in this case and for travel outside India which has been done in this case and for travel outside India which has been done in this case and therefore the assessee therefore the assessee- employer defaulted in not deducting tax employer defaulted in not deducting tax at source from this amount claimed by its employees as LTC. at source from this amount claimed by its employees as LTC. at source from this amount claimed by its employees as LTC.

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There were two violations of the LTC Rules, poin There were two violations of the LTC Rules, pointed out by the ted out by the Assessing Officer: Assessing Officer: A. The employee did not travel only to a domestic destination A. The employee did not travel only to a domestic destination A. The employee did not travel only to a domestic destination but to a foreign country as well and but to a foreign country as well and B. The employees had admittedly not taken the shortest B. The employees had admittedly not taken the shortest B. The employees had admittedly not taken the shortest possible route between the two destinations thus the Applicant possible route between the two destinations thus the Applicant possible route between the two destinations thus the Applicant was held to be an assessee in default by the Assessing Officer. held to be an assessee in default by the Assessing Officer. held to be an assessee in default by the Assessing Officer. The travel undertaken by the employees as LTC was hence in The travel undertaken by the employees as LTC was hence in 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 of the Act read with Rule 2B of the Income Tax Rules, 1962, Income Tax Rules, 1962, both of which have been reproduced both of which have been reproduced above. The order of the Assessing Officer was challenged above. The order of the Assessing Officer was challenged above. The order of the Assessing Officer was challenged before CIT (A), which was dismissed and so was their appeal before CIT (A), which was dismissed and so was their appeal before CIT (A), which was dismissed and so was their appeal before the Income Tax Appellate Tribunal. before the Income Tax Appellate Tribunal. 9. The Delhi High Court vide its order dated 13.01.2020 9. The Delhi High Court vide its order dated 13.01.2020 9. The Delhi High Court vide its order dated 13.01.2020 dismissed the appeal holding that there was no substantial ssed the appeal holding that there was no substantial ssed the appeal holding that there was no substantial question of law in the Appeal. It was held that the amount question of law in the Appeal. It was held that the amount question of law in the Appeal. It was held that the amount received by the employees of the assessee employer towards received by the employees of the assessee employer towards received by the employees of the assessee employer towards their LTC claims is not liable for the exemption as these their LTC claims is not liable for the exemption as these their LTC claims is not liable for the exemption as these employees employees had had visited foreign visited fore ign countries countries which which is is not not permissible under the law. permissible under the law. 10. The provisions of law discussed above prescribe that the air 10. The provisions of law discussed above prescribe that the air 10. The provisions of law discussed above prescribe that the air fare between the two points, within India will be given and the fare between the two points, within India will be given and the fare between the two points, within India will be given and the LTC which will be given will be of the shortest route between LTC which will be given will be of the shortest route between LTC which will be given will be of the shortest route between these two places, which have to be within India. A conjoint places, which have to be within India. A conjoint places, which have to be within India. A conjoint reading of the provisions discussed herein with the facts of this reading of the provisions discussed herein with the facts of this reading of the provisions discussed herein with the facts of this case cannot sustain the argument of the appellant that the case cannot sustain the argument of the appellant that the case cannot sustain the argument of the appellant that the travel of its employees was within India and no payments were travel of its employees was within India and no payments were travel of its employees was within India and no payments were made for any foreig made for any foreign leg involved. 11. We do not want to get into the role of the travel agencies 11. We do not want to get into the role of the travel agencies 11. We do not want to get into the role of the travel agencies and the present dynamics of air fare, but it is difficult for us to and the present dynamics of air fare, but it is difficult for us to and the present dynamics of air fare, but it is difficult for us to accept that a person will avail foreign tour without paying any accept that a person will avail foreign tour without paying any accept that a person will avail foreign tour without paying any price for it. We leave it at that. price for it. We leave it at that. 12. It can be seen from the records that many of the employees be seen from the records that many of the employees be seen from the records that many of the employees of the appellants had undertaken travel to Port Blair via of the appellants had undertaken travel to Port Blair via of the appellants had undertaken travel to Port Blair via Malaysia, Singapore or Port Blair via Bangkok, Malaysia or Malaysia, Singapore or Port Blair via Bangkok, Malaysia or Malaysia, Singapore or Port Blair via Bangkok, Malaysia or Rameswaram via Mauritius or Madurai via Dubai, Thailand Rameswaram via Mauritius or Madurai via Dubai, Thailand Rameswaram via Mauritius or Madurai via Dubai, Thailand and Port Blair via Europe etc. and Port Blair via Europe etc. It is very difficult to appreciate as It is very difficult to appreciate as

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to how the appellant who is the assessee appellant who is the assessee-employer could have employer could have failed to take into account this aspect. This was the elephant in failed to take into account this aspect. This was the elephant in failed to take into account this aspect. This was the elephant in the room. 13. The contention of the Appellant that there is no specific bar 13. The contention of the Appellant that there is no specific bar 13. The contention of the Appellant that there is no specific bar under Section 10(5) Section 10(5) for a foreign travel and therefore a foreign for a foreign travel and therefore a foreign journey can be availed as long as the starting and destination journey can be availed as long as the starting and destination journey can be availed as long as the starting and destination points remain within India is also without merits. LTC is for points remain within India is also without merits. LTC is for points remain within India is also without merits. LTC is for travel within India, from one travel within India, from one place in India to another place in place in India to another place in India. There should be no ambiguity on this. India. There should be no ambiguity on this. 14. The second argument urged by the appellant that payments 14. The second argument urged by the appellant that payments 14. The second argument urged by the appellant that payments made to these employees was of the shortest route of their made to these employees was of the shortest route of their made to these employees was of the shortest route of their actual travel cannot be accepted either. It has already actual travel cannot be accepted either. It has already actual travel cannot be accepted either. It has already been clarified above, that in view of the provisions of the Act, the clarified above, that in view of the provisions of the Act, the clarified above, that in view of the provisions of the Act, the moment employees undertake travel with a foreign leg, it is not moment employees undertake travel with a foreign leg, it is not moment employees undertake travel with a foreign leg, it is not a travel within India and hence not covered under the a travel within India and hence not covered under the a travel within India and hence not covered under the provisions of provisions of Section 10(5) of the Act. 15. A foreign travel also frustrates the basic purpose of LTC. 15. A foreign travel also frustrates the basic purpose of LTC. 15. A foreign travel also frustrates the basic purpose of LTC. The basic objective of the LTC scheme was to The basic objective of the LTC scheme was to familiarise a civil familiarise a civil servant or a Government employee to gain some perspective of servant or a Government employee to gain some perspective of servant or a Government employee to gain some perspective of Indian culture by traveling in this vast cou Indian culture by traveling in this vast country. It is for this ntry. It is for this reason that the 6th Pay Commission rejected the demand of reason that the 6th Pay Commission rejected the demand of reason that the 6th Pay Commission rejected the demand of paying cash compensation in lieu of LTC and also rejected the paying cash compensation in lieu of LTC and also rejected the paying cash compensation in lieu of LTC and also rejected the demand of foreign travel. In para 4.3.4 of the 6th Pay demand of foreign travel. In para 4.3.4 of the 6th Pay demand of foreign travel. In para 4.3.4 of the 6th Pay Commission Report dated March, 2008 this is what was said : Commission Report dated March, 2008 this is what was said : Commission Report dated March, 2008 this is what was said :- “4.3.4. The demand for allowing travel abroad at least once in “4.3.4. The demand for allowing travel abroad at least once in “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 entire career under the scheme is not in consonance with the entire career under the scheme is not in consonance with the basic objective of the scheme. the basic objective of the scheme. The Government employee cannot gain any perspective of the The Government employee cannot gain any perspective of the The Government employee cannot gain any perspective of the Indian culture by traveling abroad. B Indian culture by traveling abroad. Besides, the attendant cost esides, the attendant cost in foreign travel would also make the expenditure under this in foreign travel would also make the expenditure under this in foreign travel would also make the expenditure under this scheme much higher. The Commission is, therefore, not inclined scheme much higher. The Commission is, therefore, not inclined scheme much higher. The Commission is, therefore, not inclined to concede the demand to allow foreign travel under LTC.” This to concede the demand to allow foreign travel under LTC.” This to concede the demand to allow foreign travel under LTC.” This is also an objection of the Revenue which is also an objection of the Revenue which has been raised in its has been raised in its counter counter counter affidavit affidavit affidavit filed filed filed by by by respondent respondent respondent no. no. no. 1-Assistant 1 1 Commission of Income Tax wherein the Revenue has asserted Commission of Income Tax wherein the Revenue has asserted Commission of Income Tax wherein the Revenue has asserted that the provision for LTC was introduced to motivate that the provision for LTC was introduced to motivate that the provision for LTC was introduced to motivate employees and encourage its employees towards tourism in employees and encourage its employees towards tourism in employees and encourage its employees towards tourism in India and it is for this reason that reimbursement of LTC was it is for this reason that reimbursement of LTC was it is for this reason that reimbursement of LTC was exempted. There was no intention of legislature to allow the exempted. There was no intention of legislature to allow the exempted. There was no intention of legislature to allow the

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employees to travel abroad in the garb of LTC available by employees to travel abroad in the garb of LTC available by employees to travel abroad in the garb of LTC available by virtue of Section 10(5) Section 10(5) of the Act. Therefore, the Revenue has a t. Therefore, the Revenue has a valid objection (apart from other objections which are clearly valid objection (apart from other objections which are clearly valid objection (apart from other objections which are clearly violative of the Statute), that the intention and purpose of the violative of the Statute), that the intention and purpose of the violative of the Statute), that the intention and purpose of the scheme is also violated in the garb of tour within India, foreign scheme is also violated in the garb of tour within India, foreign scheme is also violated in the garb of tour within India, foreign travel is being availed. travel is being availed. 16. The aforementioned order passed by the CIT(A) has rightly he aforementioned order passed by the CIT(A) has rightly he aforementioned order passed by the CIT(A) has rightly held that the obligation of deducting tax is distinct from held that the obligation of deducting tax is distinct from held that the obligation of deducting tax is distinct from payment of tax. The appellant cannot claim ignorance about the payment of tax. The appellant cannot claim ignorance about the payment of tax. The appellant cannot claim ignorance about the travel plans of its employees as during settlement of LTC Bills travel plans of its employees as during settlement of LTC Bills travel plans of its employees as during settlement of LTC Bills the complete the complete facts are available before the assessee about the facts are available before the assessee about the details of their employees’ travels. Therefore, it cannot be a details of their employees’ travels. Therefore, it cannot be a details of their employees’ travels. Therefore, it cannot be a case of bonafide mistake, as all the relevant facts were before case of bonafide mistake, as all the relevant facts were before case of bonafide mistake, as all the relevant facts were before the Assessee employer and he was therefore fully in a position the Assessee employer and he was therefore fully in a position the Assessee employer and he was therefore fully in a position to calculate the to calculate the ‘estimated income’ of its employees. The ‘estimated income’ of its employees. The contention of Shri K.V. Vishwanathan, learned contention of Shri K.V. Vishwanathan, learned senior advocate senior advocate that there may be a bonafide mistake by the assessee that there may be a bonafide mistake by the assessee that there may be a bonafide mistake by the assessee- employer in calculating the ‘estimated income’ cannot be employer in calculating the ‘estimated income’ cannot be employer in calculating the ‘estimated income’ cannot be accepted since all the relevant documents accepted since all the relevant documents and material were and material were before the assessee before the assessee- employer at the relevant time and the employer at the relevant time and the assessee employer therefore ought to have applied his mind assessee employer therefore ought to have applied his mind assessee employer therefore ought to have applied his mind and deducted tax at source as it was his statutory duty, and deducted tax at source as it was his statutory duty, and deducted tax at source as it was his statutory duty, under Sectio Section 192(1) of the Act.” 8.3 Without prejudice, Without prejudice, before us the assessee has made two before us the assessee has made two submissions. Firstly, Firstly, payment of LTC was made by the respective was made by the respective branch of the employee of their posting and not by the assessee branch of the employee of their posting and not by the assessee branch of the employee of their posting and not by the assessee ,therefore assessee was not liable for deduction of tax at source on was not liable for deduction of tax at source on was not liable for deduction of tax at source on the component of LTC. But we find that assessee has not filed copy the component of LTC. But we find that assessee has not filed copy the component of LTC. But we find that assessee has not filed copy of form No. 16 issued either by the assessee or respective branch of of form No. 16 issued either by the assessee or respective branch of of form No. 16 issued either by the assessee or respective branch of the hosting of the employee and therefore it was not possible for us the hosting of the employee and therefore it was not possible for us the hosting of the employee and therefore it was not possible for us to verify the contention of the o verify the contention of the assessee. Since we have already Since we have already restored the appeal to the Ld. CIT(A) for adjudication on merit, the restored the appeal to the Ld. CIT(A) for adjudication on restored the appeal to the Ld. CIT(A) for adjudication on assessee is at liberty to raise such contention before the Ld. CIT(A). assessee is at liberty to raise such contention before the Ld. CIT(A assessee is at liberty to raise such contention before the Ld. CIT(A

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8.4 Secondly, the Ld. Counsel of the assessee the Ld. Counsel of the assessee the Ld. Counsel of the assessee before us has submitted that payees have payees have already filed their return of already filed their return of income, taken into account the the sum of LTC for computing return of income computing return of income and already had paid tax on the said and already had paid tax on the said LTC amount amount, therefore invoking the first proviso to section 201(1) of the Act he first proviso to section 201(1) of the Act he first proviso to section 201(1) of the Act , the assessee shall not deemed to be the assessee in default if the assessee shall not deemed to be the assessee in default if the assessee shall not deemed to be the assessee in default if the assessee furnishes a Certificate Certificate from an accountant in prescribed proforma in prescribed proforma. The relevant proviso of section 201(1) of the Act is reproduced as The relevant proviso of section 201(1) of the Act is reproduced as The relevant proviso of section 201(1) of the Act is reproduced as under:

“201. (1) Where any person, including the (1) Where any person, including the principal officer of a principal officer of a company,— (a) who is required to deduct any sum in accordance with the (a) who is required to deduct any sum in accordance with the (a) who is required to deduct any sum in accordance with the provisions of this Act; or provisions of this Act; or (b) referred to in sub (b) referred to in sub-section (1A) of section 192 on 192, being an employer, does not deduct, or does not pay, or after so deducting fails to does not deduct, or does not pay, or after so deducting fails to does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required by or under pay, the whole or any part of the tax, as required by or under pay, the whole or any part of the tax, as required by or under this Act, then, such person, shall, without prejudice to any other this Act, then, such person, shall, without prejudice to any other this Act, then, such person, shall, without prejudice to any other consequences which he may incur, b consequences which he may incur, be deemed to be an e deemed to be an assessee in default in respect of such tax: assessee in default in respect of such tax: Provided that any person, including the principal officer that any person, including the principal officer that any person, including the principal officer of a company, who fails to deduct the whole or any part of a company, who fails to deduct the whole or any part of a company, who fails to deduct the whole or any part of the tax in accordance with the provisions of this of the tax in accordance with the provisions of this of the tax in accordance with the provisions of this Chapter on the sum paid to a resident or on the sum Chapter on the sum paid to a resident or on the sum Chapter on the sum paid to a resident or on the sum credited to the account of a resident credited to the account of a resident shall not be deemed shall not be deemed to be an assessee in default in respect of such tax if such to be an assessee in default in respect of such tax if such to be an assessee in default in respect of such tax if such resident— (i) has furnished his return of income under (i) has furnished his return of income under section 139; (ii) has taken i (ii) has taken into account such sum for computing nto account such sum for computing income in such return of income; and income in such return of income; and

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(iii) has paid the tax due on the income declared by him (iii) has paid the tax due on the income declared by him (iii) has paid the tax due on the income declared by him in such return of income, in such return of income, and the person furnishes a certificate to this effect from and the person furnishes a certificate to this effect from and the person furnishes a certificate to this effect from an accountant in such form as may be presc an accountant in such form as may be prescribed ribed17: 8.5 Since, we have already remitted the appeal back to the Ld. we have already remitted the appeal back to the Ld. we have already remitted the appeal back to the Ld. CIT(A) for adjudication on merit, we feel it appropriate to direct the CIT(A) for adjudication on merit, we feel it appropriate to CIT(A) for adjudication on merit, we feel it appropriate to assessee to file the said certificate under first proviso to section assessee to file the said certificate under first prov assessee to file the said certificate under first prov 201(1) of the Act before the Ld. CIT(A) 201(1) of the Act before the Ld. CIT(A), which will be considered by which will be considered by the Ld CIT(A) in accordance with law. in accordance with law.

8.6 As far as other grounds of appeal are concerned, we are not As far as other grounds of appeal are concerned, we are not As far as other grounds of appeal are concerned, we are not adjudicating upon as the Ld. CIT(A) has been directed to admit the adjudicating upon as the Ld. CIT(A) has been directed to admit the adjudicating upon as the Ld. CIT(A) has been directed to admit the appeal for adjudication upon merit and therefore, these grounds ppeal for adjudication upon merit and therefore, these grounds are ppeal for adjudication upon merit and therefore, these grounds left open for agitating for agitating before appropriate forum, if so required. if so required.

State Bank of India HRMS 23 State Bank of India HRMS ITA No. 3111/M/2022 & 12Other appeals ITA No. 3111/M/202

State Bank of India HRMS 24 State Bank of India HRMS ITA No. 3111/M/2022 & 12Other appeals ITA No. 3111/M/202

the return of income filed and employees have paid tax on the said the return of income filed and employees have paid tax on the said the return of income filed and employees have paid tax on the said amount of LTC, which was liable amount of LTC, which was liable for deduction of tax at source. The for deduction of tax at source. The learned Counsel submitted that assessee is willing to file a l submitted that assessee is willing to file a l submitted that assessee is willing to file a certificate from the accountant as prescribed under provisio to certificate from the accountant as prescribed under provisio to certificate from the accountant as prescribed under provisio to section 201(1) of the section 201(1) of the Act. Since we have directed the Ld. CIT(A) to ct. Since we have directed the Ld. CIT(A) to admit the appeal and adjud admit the appeal and adjudicate on merit, he is further directed to icate on merit, he is further directed to take into consideration the submission of the assessee in relation to take into consideration the submission of the assessee in relation to take into consideration the submission of the assessee in relation to invoking of first proviso to section 201(1) of the invoking of first proviso to section 201(1) of the Act and decide the ct and decide the issue in accordance with law. issue in accordance with law.

11.1 As far as other grounds of appeal are As far as other grounds of appeal are concerned, we are not concerned, we are not adjudicating upon as the Ld. CIT(A) has been directed to admit the adjudicating upon as the Ld. CIT(A) has been directed to admit the adjudicating upon as the Ld. CIT(A) has been directed to admit the appeal for adjudication upon merit and therefore, these grounds are appeal for adjudication upon merit and therefore, these grounds are appeal for adjudication upon merit and therefore, these grounds are left open for agitating before appropriate forum, if so required. left open for agitating before appropriate forum, if so required. left open for agitating before appropriate forum, if so required.

State Bank of India HRMS 25 State Bank of India HRMS ITA No. 3111/M/2022 & 12Other appeals ITA No. 3111/M/202

therefore, the assessee is therefore, the assessee is not in default. The relevant additional default. The relevant additional ground raised by the ground raised by the assessee is reproduced as under: is reproduced as under:

“a.On the facts and in law, the learned AO has erred in passing a.On the facts and in law, the learned AO has erred in passing a.On the facts and in law, the learned AO has erred in passing order under Section 201 of the Act treating the Appellant to be order under Section 201 of the Act treating the Appellant to be order under Section 201 of the Act treating the Appellant to be in 'Assessee in default under Sec in 'Assessee in default under Section 201 of the Act, without tion 201 of the Act, without considering the Interim Order of the Hon'ble High Court of considering the Interim Order of the Hon'ble High Court of considering the Interim Order of the Hon'ble High Court of Madras passed on 16 February 2015, restraining the Appellant Madras passed on 16 February 2015, restraining the Appellant Madras passed on 16 February 2015, restraining the Appellant bank from deducting Tax at sourceon LFC payment made to its bank from deducting Tax at sourceon LFC payment made to its bank from deducting Tax at sourceon LFC payment made to its employees till finaldisposal of Writ Petition. employees till finaldisposal of Writ Petition. b. On the facts and in law, the learned AO haserred by treating On the facts and in law, the learned AO haserred by treating On the facts and in law, the learned AO haserred by treating the Appellant as Assessee indefault without appreciation that the Appellant as Assessee indefault without appreciation that the Appellant as Assessee indefault without appreciation that deduction of TDSwould have led to the defiance and deduction of TDSwould have led to the defiance and deduction of TDSwould have led to the defiance and disobedience ofthe Interim Order of the Hon'ble High Court disobedience ofthe Interim Order of the Hon'ble High Court disobedience ofthe Interim Order of the Hon'ble High Court ofMadras dated 16 Fe ofMadras dated 16 February 2015 which would have entailed bruary 2015 which would have entailed contempt proceeding againstAppellant when the Hon'ble High contempt proceeding againstAppellant when the Hon'ble High contempt proceeding againstAppellant when the Hon'ble High Court of Madras has categorically restrained the Appellant from Court of Madras has categorically restrained the Appellant from Court of Madras has categorically restrained the Appellant from deducting Tax at source on LFC payment made toits employees. deducting Tax at source on LFC payment made toits employees. deducting Tax at source on LFC payment made toits employees. c. On the Facts and in law, the Ld c. On the Facts and in law, the Ld. Assessing Officer erred in . Assessing Officer erred in treating the appellant as assesses in defaultunder section 201 treating the appellant as assesses in defaultunder section 201 treating the appellant as assesses in defaultunder section 201 of the Act when the Hon'bleHigh court of Madras has of the Act when the Hon'bleHigh court of Madras has of the Act when the Hon'bleHigh court of Madras has specifically observedthat that if the Writ Petition No. 11991 of specifically observedthat that if the Writ Petition No. 11991 of specifically observedthat that if the Writ Petition No. 11991 of 2014 is dismissed, 'employees' will liable to p 2014 is dismissed, 'employees' will liable to pay tax on the ay tax on the amount paid by bank, thereby casting liability onthe employees amount paid by bank, thereby casting liability onthe employees amount paid by bank, thereby casting liability onthe employees to pay the tax on the amount pay bybank and therefore, the to pay the tax on the amount pay bybank and therefore, the to pay the tax on the amount pay bybank and therefore, the Appellant Bank is out of the Purview of Section 201 of the Act. Appellant Bank is out of the Purview of Section 201 of the Act. Appellant Bank is out of the Purview of Section 201 of the Act. d. On the facts and in law, the Ld. Assessing officererr d. On the facts and in law, the Ld. Assessing officererr d. On the facts and in law, the Ld. Assessing officererred in holding that appellant bank ought to have deducted TDS on holding that appellant bank ought to have deducted TDS on holding that appellant bank ought to have deducted TDS on payments made to its employeeson LTC payment made to its payments made to its employeeson LTC payment made to its payments made to its employeeson LTC payment made to its employees when by virtue of order of the Hon'ble High Court of employees when by virtue of order of the Hon'ble High Court of employees when by virtue of order of the Hon'ble High Court of Madras dated 16th February 2015, the paymentmade by the Madras dated 16th February 2015, the paymentmade by the Madras dated 16th February 2015, the paymentmade by the appellants to it appellants to its employees would notamount to 'income' so as s employees would notamount to 'income' so as to enable the AppellantBank to deduct tax at source. Therefore, to enable the AppellantBank to deduct tax at source. Therefore, to enable the AppellantBank to deduct tax at source. Therefore, theAppellant was correct in not deducting TDS onpayments theAppellant was correct in not deducting TDS onpayments theAppellant was correct in not deducting TDS onpayments made for LTC. made for LTC. e. The Appellants craves leave to add, amend or omitany of the e. The Appellants craves leave to add, amend or omitany of the e. The Appellants craves leave to add, amend or omitany of the ground as an ground as and when required with theleave of this Hon'ble d when required with theleave of this Hon'ble Court.”

State Bank of India HRMS 26 State Bank of India HRMS ITA No. 3111/M/2022 & 12Other appeals ITA No. 3111/M/202

12.1 Alternatively before us, the Ld. Counsel of the assessee Alternatively before us, the Ld. Counsel of the assessee Alternatively before us, the Ld. Counsel of the assessee submitted that assessee has complied the three conditions as submitted that assessee has complied the three conditions as submitted that assessee has complied the three conditions as provided under the first proviso to section 201(1) of the Act and the provided under the first proviso to section 201(1) of the Act and the provided under the first proviso to section 201(1) of the Act and the assessee is willing to file certificate from is willing to file certificate from an accountant if matter is accountant if matter is restored back to the Assessing Officer. restored back to the Assessing Officer.

State Bank of India HRMS 27 State Bank of India HRMS ITA No. 3111/M/2022 & 12Other appeals ITA No. 3111/M/202

13.1 The grounds raised in other appeals e grounds raised in other appeals out of the second set of out of the second set of appeals are identical and therefore, same are decided are identical and therefore, same are decided are identical and therefore, same are decided mutatis mutandis.