STATE BANK OF INDIA,JAMNAGAR vs. ASSISTANT REGISTRAR, RAJKOT

ITA 199/RJT/2026Status: HeardITAT Rajkot24 September 2026AY 2017-185 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee cannot be treated as an assessee in default under Section 201(1) of the Income-tax Act, 1961, for not deducting tax at source on Leave Travel Concession payments. The Tribunal relied on the decision of a coordinate bench in ITA Nos. 453 & 454/Ahd/2026, which in turn followed the Hon'ble Kerala High Court's decision in ITA No.45 of 2025 and a coordinate bench decision in ITA No.514/Agr/2024. The reasoning was that the assessee was operating under binding interim directions of the Hon'ble Madras High Court during the relevant period, which restrained it from deducting tax at source. The Tribunal emphasized that the obligation to deduct tax under Section 192 cannot override binding judicial orders. Therefore, the failure to deduct tax in such circumstances does not constitute a default contemplated under Section 201(1). Consequently, the demand raised under Section 201(1) and interest under Section 201(1A) were directed to be deleted. The Tribunal expressly left undecided the penalty proceedings under Section 271(c).

What were the facts?

The assessee, State Bank of India (SBI), a branch, treated Leave Fare Concession (LFC) and Leave Travel Concession (LTC) provided to its employees as exempt under Section 10(5) of the Income-tax Act, 1961, when computing tax deductible at source (TDS) under Section 192. The DCIT, TDS Circle, Rajkot, observed that TDS was not deducted on these payments and issued a notice. The assessee explained its basis for exemption. However, the DCIT treated SBI as an assessee in default under Section 201(1) and raised a demand of Rs. 2,05,138/- for Assessment Year 2017-18. Penalty proceedings under Section 271(c) were also initiated. The assessee appealed to the CIT(A), who dismissed the appeal, sustaining the DCIT's order. SBI then filed an appeal before the ITAT, Rajkot Bench.

What were the issues?

1. Whether the assessee, State Bank of India, can be treated as an assessee in default under Section 201(1) of the Income-tax Act, 1961, for failure to deduct tax at source on Leave Travel Concession payments, when it was operating under interim judicial directions restraining such deduction? Assessee's Contention: The assessee argued that the issue is squarely covered by a coordinate bench decision in ITA Nos. 453 & 454/Ahd/2026, which allowed appeals on identical facts regarding LTC provided by SBI. The assessee contended that it was bound by interim directions of the Hon'ble Madras High Court and therefore, its failure to deduct tax could not be considered a default under Section 201(1). Revenue's Contention: The Revenue's Ld. Sr. DR did not raise serious objections but supported the orders of the authorities below.

Which sections of the Income-tax Act were involved?

Section 10(5),Section 192,Section 201(1),Section 201(1A),Section 271(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, Rajkot Bench, Rajkot

Before: Dr. Arjun Lal Saini & Shri Sonjoy Sarma

For Appellant: Shri Maulik Kansara , Ld. AR
For Respondent: Shri Ganesh Iyer, Ld. Sr. DR
Hearing: 23/09/2026Pronounced: 24/09/2026

Per, Shri Sonjoy Sarma, JM: Captioned appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), ADDL/JCIT(A)-2, Siliguri vide order dated 11.12.2025 passed for Assessment Year (AY) 2017-18, which in turn arises out of an order passed by DCIT Circle, TDS, Rajkot u/s. 201 of the Act, dated 20.10.2023. State Bank of India v.

The order continues below.

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