STATE BANK OF INDIA,AHMEDABAD vs. ITO, TDS WARD 2, SURAT, SURAT

ITA 461/SRT/2026Status: DisposedITAT Surat25 September 2026AY 2016-1712 pages
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What were the facts?

The appeals were filed by the State Bank of India (assessee) against the orders of the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)]. The AO had raised demands for Tax Deducted at Source (TDS) under Section 201(1) and interest under Section 201(1A) for the Assessment Years (AY) 2016-17 and 2017-18. The dispute arose because the assessee made payments/reimbursements of Leave Fare Concession/Leave Travel Concession (LFC/LTC) to its employees for journeys involving a foreign leg. The AO held that exemption under Section 10(5) read with Rule 2B was only for travel within India, making the employer liable for TDS. The CIT(A) upheld the AO's orders. One appeal (ITA 326/SRT/2026) was withdrawn by the assessee.

What did the Tribunal hold?

The Tribunal held that the assessee could not be treated as an assessee in default under Section 201(1) of the Income Tax Act, 1961, for the impugned period. The reasoning was that during the relevant assessment years, the assessee-bank was operating under binding interim directions of the Hon'ble Madras High Court, which had specifically clarified that LFC payments would not constitute income for TDS purposes. Therefore, the assessee was legally bound to comply with these judicial directions, and failure to deduct tax at source could not be considered a default under Section 201(1). Consequently, the interest levied under Section 201(1A) was also not sustainable. The Tribunal respectfully followed the decisions of the ITAT Ahmedabad Bench, the Hon'ble Kerala High Court, and the ITAT Agra Bench. The Assessing Officer was directed to delete the demands raised under Section 201(1) and the interest levied under Section 201(1A). The appeal ITA 326/SRT/2026 was dismissed as withdrawn.

What were the issues?

1. Whether the assessee, State Bank of India, is liable for non-deduction/short-deduction of TDS under Section 201(1) and interest under Section 201(1A) on payments of LFC/LTC to employees for journeys involving a foreign leg, for AY 2016-17 and 2017-18? Assessee's Contentions: The assessee argued that the facts and controversy were identical to those adjudicated by the ITAT, Ahmedabad Bench in ITA No. 1011/Ahd/2026. In that case, the Tribunal held that the assessee could not be treated as an assessee in default under Section 201(1) for the period during which it was operating under binding interim directions of the Hon'ble Madras High Court, which clarified that LFC payments would not constitute income for TDS purposes. The assessee contended that any deduction contrary to these judicial orders would have exposed them to contempt of court proceedings. They relied on the decisions of the Hon'ble Kerala High Court in State Bank of India v. CIT and the ITAT Agra Bench in State Bank of India v. CIT(Appeals). Revenue's Contentions: The Revenue relied on the orders of the lower authorities but could not controvert the submissions made by the assessee or provide any distinguishing features.

Which sections of the Income-tax Act were involved?

Section 10(5),Section 201(1),Section 201(1A),Section 192

AI-generated summary — verify with the full judgment below

आयकर अपीलीय अधिकरण, सूरत न्यायपीठ, सूरत IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRI B.M. BIYANI, ACCOUNTANT MEMBER State Bank of India, बनाम/ Income Tax Officer-TDS, C/o Divyang Shah, CAs, Ward-2, 403, 4th Floor, Vs. 201, 2nd Floor, Income Tax Office, Devashish Complex, Anavil Business Center, Near Regenta Central Adajan Hazira Road, Antarim Hotel, Off CG Adajan, Surat Road, Ahmedabad. (Assessee/Appellant) (Revenue/Respondent) PAN: AAACS8577K / TAN: SRTS07982C State Bank of India, बनाम/ Income Tax Officer-TDS, C/o Divyang Shah, CAs, Income Tax Office, Vs. 201, 2nd Floor, 1st Floor, Harikunj Devashish Complex, Building, Above Bank of Near Regenta Central Baroda, Station Road, Antarim Hotel, Off CG Bharuch. Road, Ahmedabad. (Assessee/Appellant) (Revenue/Respondent) PAN: AAACS8577K / TAN: BRDS04243B

State Bank of India ITA Nos. 326, 439, 461, 471, 472, 535, 536/SRT/2026 (AY 2016-17 & 2017-18) State Bank of India, बनाम/ Income Tax Officer-TDS, C/o Divyang Shah, CAs, Ward-2, 403, 4th Floor, Vs. 201, 2nd Floor, Income Tax Office, Devashish Complex, Anavil Business Center, Near Regenta Central Adajan Hazira Ro

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