STATE BANK OF INDIA LCPC,PATNA vs. ACIT/DCIT, TDS CIRCLE PATNA, PATNA

By IN THE INCOME TAX APPELLATE TRIBUNAL PATNA ‘DB’ BENCH AT KOLKATA [Virtual Court] Before SHRI YOGESH KUMAR US, JUDICIAL MEMBER & SHRI RAKESH MISHRA, ACCOUNTANT MEMBER State Bank of India LCPC ACIT/DCIT TDS, Circle- Vs. Patna (Appellant) (Respondent) PAN: PTNS04940F Appearances: Assessee represented by : Rakesh Kumar Singh, Adv. Department represented by : Ravi Kant, Sr. DR. Date of concluding the hearing : 23.06.2026 Date of pronouncing the order : 03.08.2026 ORDER PER RAKESH MISHRA, ACCOUNTANT MEMBER: This appeal filed by the assessee is against the order of the Addl/JCIT(A)-3, Hyderabad [hereinafter referred to as Ld. ‘Addl/JCIT(A)'] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') for AY 2016-17 (which is incorrectly mentioned as AY 2017-18 in the table on page 1 of the appeal order but correctly mentioned in para 1.0 as A.Y. 2016-17) dated 09.12.2025. 2. The assessee is in appeal before the Tribunal raising the following grounds of appeal: "I. For that the order impugned passed by learned ADJL/JCIT(A)-3 Hyderabad (hereinafter referred in short Appellate Authority) is bad in law as well as on facts. II. For that the order passed by the Learned Appellate Authority is contrary to the provision of law and facts and without appreciating the facts and order passed by the Hon'ble High Court and Hon'ble Supreme Court. III. For that the Learned Appellate Authority erred in holding that appellate as assesses is default under section 201(1) of Income Tax Act not deducting TDS at source on payment of Leave Fare Concession (LFC) raising demand of Rs.4,14,835/-. IV. For that the Appellate Authority fails to appreciate that Hon'ble High Court of Madras stay the order of deducting TDS on LFC vide order dated 16.2.20215 in W.P.No.11991 of 2014 whereas circular dated 15.4.2014 was challenged. V. For that the learned appellate authority erred is appreciating that the direction given by the Hon'ble High Court of Madras is binding on the appellant by not deducting TDS because order dated 16.2.2015 of interim stay was extended till disposal of the writ petition. VI. For that the appellate authority failed to appreciate that Hon'ble High Court of Madras in W.P.No.1653 of 2022 vide order dated 8.8.2022 observed that during the pendency of this appeal no recovery shall be affected from their salary. VII. For that, the appellate authority erred is not appreciating that the appellant was under the bonafide belief that no TDS was applicable on the reimbursement of the LFC paid to its employees involving in route foreign travel in view of section 10(5) of the IT Act. VIII. For that the fact is that the Hon'ble High Court Madras allowed the W.A.No.1653 of 2022 and vide order dated 8.6.2023 quashed the circular dated 7.4.2014 issued by IBA and letter dated 15.4.2014 issued by the Bank regarding revised LTC/HTC and remanded the matter for fresh consideration. IX. For that the appellant bank challenged the order dated 8.6.2023 passed by Hon'ble High court of Madras passed in W.A.No.1653 of 2022 before the Hon'ble Supreme Court is SLP No.16734 of 2023 which is still pending. X. For that the observation of the appellate authority is that from 24.6.2022 to 8.8.2022 and from 8.6.2023 to 28.8.2023 there was not stay of any court, so the appellant is liable able to deduct TDS on LTC is completely ignorance of judicial mind. XI. For that the appellate authority failed to appreciate that if any appeal is filed before the Higher court that is continuation of appeal/ proceeding there is no interregnum because any order passed by the Hon'ble High Court merged with order of Hon'ble Supreme Court. XII. For that the order passed by learned Appellate authority in para 6.1.9 if self contradictory is sub-para(s) says that any recovery action must be taken only after duly considering of the decision of Hon'ble Supreme Court in SLP No.16734 of 2023 and in Sub-Para (ii) directed the appellant to file computation income and TDS rate applicable in each employee separately and AO may rectified the order and reduced excess demands revised if any as per applicable tax rates. XIII. For that the appellant takes liberty to file/submit any other ground(s) at the time of hearing." 3. Brief facts of the case are that the Assessing Officer (hereinafter referred to as Ld. 'AO') received information that the assessee had made payments in respect of Leave Fare Concession (LFC) to its employees for travel involving a foreign leg during FY 2015-16 without deducting tax at source. Consequently, the Ld. AO initiated proceedings u/s 201(1) & 201(1A) of the Act and passed an order dated 31.03.2023 treating the assessee as an assessee in default for the non-deduction of TDS on LFC payments amounting to ₹9,65,024/- in view of the decision of the Hon'ble Supreme Court in the case of State Bank of India vs. ACIT in Civil Appeal No. 8181 of 2022 vide order dated 4th November, 2022. Aggrieved with the order made u/s 201(1) & 201(1A) of the Act, the assessee filed an appeal before the Ld. Addl/JCIT(A) who noted that based on the decision of the Hon'ble Supreme Court in the case of State Bank of India vs. CIT, Civil Appeal No. 8181 of 2022, dated 04.11.2022, LTC involving a foreign leg does not fall within the ambit of section 10(5) of the Act, rendering such reimbursements liable for tax deduction at source. The Ld. Addl/JCIT(A) further directed that any recovery action must be taken only after duly considering the decision of the Hon'ble Supreme Court in SLP No. 16734/2023, and instructed the assessee to file the computation of income and TDS rates applicable to each employee separately so the Ld. AO may rectify the order and reduce excess demands, if any. Accordingly, the Ld. Addl/JCIT(A) confirmed the action of the Ld. AO and dismissed the appeal of the assessee. 4. Aggrieved with the order of the Ld. CIT(A), the assessee has filed the appeal before the Tribunal. 5. Rival contentions were heard and the submissions made have been examined. The Ld. AR submitted that the issue involves deduction of TDS u/s 195 of the Act. The SBI had issued a Circular on 15.04.2014 that the staff was not entitled for foreign travel on LTC. The Ministry of Finance also had issued a letter that the employees were not entitled for overseas LTC. This issue was challenged before the Hon'ble Madras High Court vide Writ Petition 11991/2014 and an interim stay was granted on 25.04.2014 on the Circular dated 15.04.2014, and the writ petition was finally dismissed by an order dated 24.06.2022. Vide subsequent order dated 08.06.2023 in Writ Appeal No.1653 of 2022 and CMP. Nos.11323 and 23230 of 2022 filed before the Division Bench, Hon’ble Madras High Court held vide para 8.7 the “In the light of the legal proposition and having regard to the admitted fact that no opportunity was provided to the appellants before withdrawing the overseas facility granted to them, which is in violation of the principles of natural justice, this court is inclined to set aside the letter dated 07.04.2014 and the circular dated 15.04.2014 and remand the matter to the authorities to take a decision afresh, after issuing due notice and providing an opportunity of hearing to the appellants, in accordance with law.” Vide para 8.8 of the order, the Hon’ble High Court did not express any opinion on the other two grounds, on the basis of which the Ld. Judge passed the order impugned in that appeal. It was further submitted that the SLP No. 16734/2023 dated 27.02.2024 is pending before the Hon'ble Supreme Court against the order dated 08.06.2023 of the Hon’ble High Court. It was requested by the Ld. AR that the matter may be remanded to Ld. AO to decide the issue as per the final outcome of the SLP pending before the Hon'ble Supreme Court. 6. We have considered the submissions made, gone through the facts of the case and perused the record and the order of the Ld. Addl/JCIT(A). However, we find that the issue has already been decided against the employees by an order of the Hon'ble Supreme Court in the case of State Bank of India vs. Assistant Commissioner of Income- tax [2022] 144 taxmann.com 131 (SC)/[2023] 290 Taxman 129 (SC)/[2022] 449 ITR 192 (SC)[04-11-2022] wherein the facts of the case were that the assessee, a public sector bank, granted leave travel concession (LTC) to its employees and claimed the same as exemption u/s 10(5) of the Act. The Assessing Officer held that since travel of the assessee's employees involved a foreign leg, it was in violation of the statutory provision of section 10(5) of the Act and, thus, was not eligible for deduction. The Commissioner (Appeals), the Tribunal and the High Court have upheld the disallowance of exemption made by the Assessing Officer. On the assessee's civil appeal, the Hon'ble Supreme Court have held as under: “■ It can be seen from the records that many of the employees of the appellants had undertaken travel to Port Blair via Malaysia, Singapore or Port Blair via Bangkok, Malaysia or Rameswaram via Mauritius or Madurai via Dubai, Thailand and Port Blair via Europe etc. It is very difficult to appreciate as to how the appellant who is the assessee-employer could have failed to take into account this aspect. This was the elephant in the room. [Para 12] ■ The contention of the appellant that there is no specific bar under section 10(5) for a foreign travel and therefore a foreign journey can be availed as long as the starting and destination points remain within India is also without merits. Leave travel concession (LTC) is for travel within India, from one place in India to another place in India. There should be no ambiguity on this. [Para 13] ■ The second argument urged by the appellant that payments made to these employees was of the shortest route of their actual travel cannot be accepted either. It has already been clarified above, that in view of the provisions of the Act, the moment employees undertake travel with a foreign leg, it is not a travel within India and hence not covered under the provisions of section 10(5). [Para 14] ■ A foreign travel also frustrates the basic purpose of LTC. The basic objective of the LTC scheme was to familiarise a civil servant or a Government employee to gain some perspective of Indian culture by travelling in this vast country. It is for this reason that the 6th Pay Commission rejected the demand of paying cash compensation in lieu of LTC and also rejected the demand of foreign travel. ■ This is also an objection of the revenue which has been raised in its counter affidavit filed by Assistant Commissioner of Income-tax wherein the revenue has asserted that the provision for LTC was introduced to motivate employees and encourage its employees towards tourism in India and it is for this reason that reimbursement of LTC was exempted. There was no intention of legislature to allow the employees to travel abroad in the garb of LTC available by virtue of section 10(5). Therefore, the revenue has a valid objection (apart from other objections which are clearly violative of the statute), that the intention and purpose of the scheme is also violated in the garb of tour within India, foreign travel is being availed. [Para 15] ■ The aforementioned order passed by the Commissioner (Appeals) has rightly held that the obligation of deducting tax is distinct from payment of tax. The appellant cannot claim ignorance about the travel plans of its employees as during settlement of LTC Bills the complete facts are available before the assessee about the details of their employees' travels. Therefore, it cannot be a case of bona fide mistake, as all the relevant facts were before the assessee employer and he was therefore fully in a position to calculate the 'estimated income' of its employees. The contention of the assessee that there may be a bona fide mistake by it in calculating the 'estimated income' cannot be accepted since all the relevant documents and material were before the assessee-employer at the relevant time and the assessee employer therefore ought to have ITA No(s). 74/PAT/2026 applied his mind and deducted tax at source as it was his statutory duty, under section 192(1). [Para 16] {emphasis supplied} ■ In conclusion no reason is found to interfere with the order passed by the Delhi High Court. The appeal is dismissed. [Para 17]” 7. A perusal of the decision of the Hon'ble Supreme Court shows that the order of the Hon'ble Delhi High Court was affirmed and the appeal was dismissed; therefore, prima facie the issue of TDS on LTC on foreign travel is no longer res integra. Since the issue pending now before the Hon'ble Supreme Court relates to the Circular dated 07.04.2014 and Circular dated 15.04.2014 being set aside and remanded to authorities to take a decision afresh and the Ld. CIT(A) has directed the Ld. AO to take any recovery action only after considering the decision in SLP No. 16734/2023, we are not inclined to interfere with the order of the Ld. CIT(A) except to the extent that the order of the Ld. CIT(A) shall be subject to the final outcome in SLP No. 16734/2023 of 2023 as is decided finally by the Hon'ble Supreme Court. Hence, the grounds of appeal are partly allowed for statistical purposes. 8. In the result, the appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced in the open Court on 3rd August, 2026. [Yogesh Kumar US] [Rakesh Mishra] Judicial Member Accountant Member Dated: 03.08.2026 Bidhan (Sr. P.S.) Copy of the order forwarded to: 1. State Bank of India LCPC, 1st Floor SBI, Patna Main Branch Building, East Gandhi Maidan, PS-Gandhi Maidan, Patna, Bihar, 800001. 2. ACIT/DCIT TDS, Circle-Patna, Bihar. 3. Addl/JCIT(A)-3, Hyderabad. 4. CIT- 5. CIT(DR), Patna Benches, Patna. 6. Guard File. //// By order