MANOJ KUMAR,VADODARA vs. INCOME TAX OFFICER, WARD 4(1)(7),, VADODARA

The assessee has taken following grounds of appeal:- “1. On facts and circumstances of the case and in law, the order passed by the Hon’ble Addl/JCIT(A), u/s 250 of the Act, without giving an opportunity of further submission in the matter as asked by the appellant and without giving the final opportunity of being heard to the appellant is bad in law. 2. On facts and circumstances of the case and in law, the order passed by the Hon’ble Addl/JCIT(A), u/s 250 of the Act, upholding the addition by the Assessing Officer, amounting to Rs.4,21,014/- on account of LTA is bad in law.”

Ground No. 1 is not pressed by the assessee and is, accordingly, dismissed as not pressed.

As regards Ground No. 2, the relevant facts are that the assessee, an employee of the State Bank of India (SBI), received Leave Travel Allowance (LTA) of Rs.4,21,014 during the year under consideration. The said amount was not included in the return of income on the understanding that it was exempt under section 10(5) of the Act, as the employer had treated the amount as exempt and had not deducted tax thereon.

During the reassessment proceedings, the Assessing Officer observed that the assessee had undertaken foreign travel and that the exemption under section 10(5) was available only in respect of travel to a place in India, subject to the prescribed conditions. Accordingly, the Assessing Officer treated the amount of Rs.4,21,014/- as taxable salary and made the addition.

Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A). The Ld. CIT(A) upheld the addition, observing that the amount attributable to foreign travel was not eligible for exemption under section 10(5) of the Act. However, in respect of the assessee’s grievance concerning TDS credit, the Ld. CIT(A) directed the Assessing Officer to allow the eligible credit after verification. The appeal was accordingly partly allowed.

Aggrieved by the order of the Ld. CIT(A) confirming the disallowance u/s 10(5) of the Act, the assessee is now in appeal before the Tribunal.

At the time hearing, the Ld. AR submitted that the assessee had claimed the LTA as exempt on the basis of Form No. 16 issued by SBI. The decision to treat the allowance as exempt, notwithstanding the foreign travel involved, had been taken by the employer, and the assessee had no role in the employer’s decision not to deduct TDS. It was further submitted that a demand of Rs.3,75,189 had been raised against SBI under sections 201(1) and 201(1A) of the Act for the relevant financial year. Out of this demand, SBI had paid Rs.1,97,554, representing 50% of the TDS demand along with interest, on 30.01.2016. In respect of the remaining amount, the Bank had addressed a letter dated 17.07.2018 to the TDS authorities seeking adjustment against refunds due to it for earlier years. Copies of the challan and the letter were placed on record.

The Ld. AR also referred to the communication dated 04.04.2025 issued by the Income-tax Officer (TDS), Ward-2, Surat (Annexure-E of paper-book), which indicated that a TDS demand continued to appear outstanding against SBI. The communication referred to an incorrect section code selected by the deductor and the Bank’s response dated 08.08.2024 regarding the unblocking of unconsumed challans and correction of the relevant entries. It was accordingly contended that the employer had accepted the TDS shortfall and taken steps towards its payment or adjustment. Taxing the same amount again in the hands of the assessee, without accounting for the tax paid or adjusted, would result in double taxation. The Ld. AR therefore prayed that the addition be deleted.

The Ld. DR, on the other hand, supported the orders of the lower authorities and submitted that the employer’s decision to treat the LTA as

The rival submissions and the material available on record have been considered. The issue for consideration is whether the addition of Rs.4,21,014/- on account of Leave Travel Allowance was rightly sustained and whether the tax paid or adjusted by the employer, State Bank of India (SBI), has been duly accounted for while determining the assessee's tax liability.

The lower authorities have noted that the assessee undertook foreign travel and claimed exemption under section 10(5) of the Act. The assessee submitted that SBI initially treated the LTA as exempt and issued Form No. 16 accordingly. Subsequently, SBI deposited 50% of the TDS shortfall along with interest on 30.01.2016 and sought adjustment of the balance against refunds due to it. The remaining 50% of the TDS shortfall has been adjusted against the refund due to the assessee. It was contended that taxing the LTA without accounting for the tax already paid by the employer would result in double recovery of tax. The assessee also relied upon Annexure-E, being the communication dated 04.04.2025 issued by the Income-tax Officer, TDS Ward-2, Surat, recording an outstanding TDS demand of approximately Rs.3,12,264/- against SBI. It was contended that the same was adjusted against the refund.

In the result, the appeal of the assessee is partly allowed.

Date of dictation …… The words processed by Hon’ble VP on his PC on ….26.10.2026….. 2. Date on which the typed draft is placed before the Dictating Member …….26.10.2026 3. Other Member……………26.10.2026…… 4. Date on which the approved draft comes to the Sr.P.S./P.S ……26.10.2026………. 5. Date on which the fair order is placed before the Dictating Member for pronouncement 27.10.26.. 6. Date on which the fair order comes back to the Sr.P.S./P.S ……27.10.2026………………. 7. Date on which the file goes to the Bench Clerk …27.10.2026….…. 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order 10. Date of Dispatch of the Order……………………………………