STATE BANK OF INDIA BR DIGODA,TIKAMGARH vs. INCOME TAX OFFICER, TDS, GWALIOR, GWALIOR

ITA 265/AGR/2026Status: DisposedITAT Agra07 October 2026AY 2017-1817 pages
AI SummaryAllowed

What were the facts?

These seven appeals by the State Bank of India (SBI) branches (appellants) are against the orders of the CIT(A) which dismissed their appeals. The appeals pertain to assessment years 2016-17 and 2017-18. The core issue revolves around the assessee bank being treated as an assessee in default under Section 201(1) and liable for interest under Section 201(1A) for not deducting tax at source on Leave Fare Concession (LFC) provided to its employees, where the travel included a foreign stop-over. Initially, the Tribunal had dismissed the appeals, but these orders were set aside upon the assessee's miscellaneous applications, which highlighted that a PAN India interim order from the Madras High Court was applicable. The present appeals are a result of this setting aside.

What did the Tribunal hold?

The Tribunal held that the assessee bank cannot be treated as an assessee in default under Section 201(1) of the Income Tax Act, 1961. The reasoning was that during the relevant assessment years, the bank was judicially bound by the interim directions of the Madras High Court, which prevented it from deducting tax at source on LFC reimbursements involving foreign travel. The Tribunal found that the subsequent order of the Supreme Court, while deciding the substantive legal issue, could not retrospectively convert an act performed in obedience to a binding judicial command into a statutory default. The Tribunal respectfully agreed with the Mumbai Bench of the Tribunal and the Kerala High Court's reasoning, which distinguished the Supreme Court's judgment based on the assessment year and the period of interim protection. Consequently, the interest under Section 201(1A), being founded upon the default contemplated under Section 201(1), cannot survive. The orders passed under Sections 201(1) and 201(1A) were set aside, and the demands raised were deleted. The substantive taxability of LFC involving a foreign leg was acknowledged as concluded against the assessee, but this did not affect the finding that the bank could not be treated as an assessee in default for not deducting tax during the period of judicial restraint.

What were the issues?

1. Whether the assessee bank can be treated as an assessee in default under Section 201(1) of the Income Tax Act, 1961, and liable for interest under Section 201(1A) for not deducting tax at source on employee LFC reimbursements involving foreign travel, during the period when an interim direction from the Madras High Court was operative? Assessee's Contention: The assessee bank argued that it was judicially bound by the interim directions of the Madras High Court, which prevented it from deducting tax at source. They relied on the Mumbai Bench of the Tribunal's decision in ITA No. 1387/Mum/2026 and connected matters, which held in their favour. They also pointed to the Kerala High Court's judgment which distinguished the Supreme Court's decision based on assessment year and the period of interim protection. Revenue's Contention: The revenue argued that the assessee bank was in default for not deducting tax at source, citing the Supreme Court's order in State Bank of India v. ACIT (Civil Appeal No. 8181/2022). They also referred to Chennai Bench decisions of the Tribunal which held that the obligation to deduct tax is distinct from the payment or recovery of tax, and the duty to deduct TDS still exists even if recovery proceedings were suspended or the bank was prevented from recovering amounts from employees. The revenue prayed for dismissal of the appeals.

Which sections of the Income-tax Act were involved?

Section 201(1),Section 201(1A)

AI-generated summary — verify with the full judgment below

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA (DB) BENCH, AGRA BEFORE: SUNIL KUMAR SINGH, JUDICIAL MEMBER Morena-476111 Centre, Gwalior-474001 PAN: AAACS8577K (Appellant) (Respondent)

2.

SBI- ADB Vs. ITO, TDS, Sabalgarh Branch, Aayakar Bhawan, Morena-252313 City Centre, Gwalior-474001 PAN: AAACS8577K (Appellant) (Respondent)

3.

SBI, Branch Digoda, Vs. ITO, TDS, Tikamgarh-472339 Aayakar Bhawan, City Centre, Gwalior-474001 PAN: AAACS8577K (Appellant) (Respondent)

4.

SBI, RBO-II, Zonal Office, Vs. ITO, TDS, City Centre Lashkar, Aayakar Bhawan, City Gwalior-474001 Centre, Gwalior-474001 PAN: AAACS8577K (Appellant) (Respondent)

ITA 337,151,175,411, 420,432 & 265/Agr/2026 5. SBI, Palera Branch, Vs. ITO, TDS, Tikamgarh-472221 Aayakar Bhawan, City Centre, Gwalior-474001 PAN: AAACS8577K (Appellant) (Respondent)

6.

SBI, RBO R-5 Shivpuri, Vs. ITO, TDS, Mahal Road Ladha Aayakar Bhawan, City Kothi, Shivpuri-473551 Centre, Gwalior-474001 PAN: AAACS8577K (Appellant) (Respondent)

7.

SBI, NFL Vijaypur, SBI Vs. ITO, TDS, Bavarikheda NFL Aayakar Bhawan, City Complex, Bavarikheda Centre, G

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