STATE BANK OF INDIA LINKING ROAD,MUMBAI vs. ASSISTANT COMISSIONER OF INCOME TAX-TDS2(2), MUMBAI
IN THE INCOME-TAX APPELLATE TRIBUNAL “B” BENCH,
MUMBAI
BEFORE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER
&
SMT. RENU JAUHRI, ACCOUNTANT MEMBER
आयकर अपील सं./ITA No. 2887/MUM/2024
(निर्धारण वर्ा / Assessment Year :2016-17)
1
7
State Bank of India
Administrative Officer
West Mumbai Branch
B Wing, LIC Complex, 1st
Floor, Jeevan Seva Annex
Building, S. V. Road,
Santracruz (W.), Mumbai-
400054
v/s.
बिधम
ACIT-TDS 2(2), Mumbai
3rd Floor Cumballa Hill
MTNL TE Building, Pedder
Road, Dr. Gopalrao
Deshmukh Marg, Cumballa
Hill, Mumbai-400026
स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AAACS8577K
Appellant/अपीलधर्थी
..
Respondent/प्रनिवधदी
आयकर अपील सं./ITA No. 2886/MUM/2024
(निर्धारण वर्ा / Assessment Year :2016-17)
State Bank of India,
Linking Road Branch,
Plot No. 533, Patwardhan
House, Bandra West,
Mumbai-400052
v/s.
बिधम
ACIT-TDS 2(2), Mumbai
3rd Floor Cumballa Hill
MTNL TE Building, Pedder
Road, Dr. Gopalrao
Deshmukh Marg, Cumballa
Hill, Mumbai-400026
स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AAACS8577K
Appellant/अपीलधर्थी
..
Respondent/प्रनिवधदी
निर्ााररती की ओर से /Assessee by:
Shri Ninad Patade
रधजस्व की ओर से /Revenue by:
Shri Leyaqat Ali Afaqui
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ITA No. 2886 & 2887/Mum/2024
A.Y. 2016-17
State Bank of India Linking Road & SBI AO West Mumbai Branch
सुिवधई की िधरीख / Date of Hearing
26.03.2025
घोर्णध की िधरीख/Date of Pronouncement
30.05.2025
आदेश / O R D E R
PER RENU JAUHRI [A.M.] :-
These two appeals are filed by the assessee against the common order of the Learned Additional/Joint Commissioner of Income-tax (Appeals),
Coimbatore-1 [hereinafter referred to as “CIT(A)”] dated 21.03.2024 passed u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for Assessment Year [A.Y.] 2016-17 in the case of several branches of S.B.I.
including the two appellant branches.
2. The assessee has raised the following grounds of appeal:
Leave fare concession
1. The learned CIT(A) erred in confirming the 201(1A) order of the TDS officer and thereby holding the appellant as an assessee in default on account of non- deduction of tax at source in respect of leave fare concession [LFC] provided by the appellant to certain employees of INR 4,30,870, where LFC was paid for a journey where the designated place was in India but the same also involved some en-route foreign travel being undertaken by the employee.
2. The learned CIT(A) erred in not appreciating that the benefit of exemption under section 10(5) is available to the appellant's employees' even in cases where the journey undertaken by an employee involves a foreign leg, as employee's designated place is in India only and he actually visits the designated place in India.
Ruling of the Madras High Court
3. The learned CIT(A) erred in not appreciating that the Bank did not deduct tax at source on the reimbursement of LFC amounts to its employees under the specific directions of the Hon'ble High Court of Madras in its Interim Order dated 16.02.2015 in W.P. No. 11991 of 2014. 4. The learned CIT(A) erred in not appreciating that in terms of the directions of the Hon'ble High Court of Madras, the amount of LFC paid to the employees would not amount to income for the purpose of deducting tax at source and if P a g e | 3
ITA No. 2886 & 2887/Mum/2024
A.Y. 2016-17
State Bank of India Linking Road & SBI AO West Mumbai Branch the writ petition is dismissed, the employees would be liable to pay tax on the amount of LFC paid by the Bank.
5. The learned CIT(A) erred in not appreciating that the directions given by the Hon'ble High Court of Madras are binding on the Bank and had the Bank deducted the tax at source, it would have been contrary to the Hon'ble High
Court order, which could have amounted to contempt of Court order.
ITAT ruling in Bank's own case
6. Without prejudice to the above, the learned CIT(A) erred in not following the decision of the juri ictional Mumbai Bench of the Income-tax Appellate
Tribunal [ITAT] [123 taxmann.com 447] in Bank's/Appellant own case. Thus, the fact that an identical subject matter has been decided in favor of the Appellant Bank by a juri ictional appellate authority (i.e. the Hon'ble ITAT -
Mumbai), was not appreciated by the learned CIT(A).
Bona fide belief
7. The learned CIT(A) erred in not appreciating that the appellant was of the bona fide belief that it was not liable to deduct tax at source in respect of LFC reimbursements provided to employees and accordingly, the appellant cannot be held to be an assessee in default within the meaning of section 201. 8. The learned CIT(A) erred in not appreciating that in terms of section 192
once an employer has honestly and fairly formed an opinion and arrived at the estimated taxable income and applied TDS accordingly, it cannot be considered as an assessee in default.
9. The learned CIT(A) erred in not appreciating that section 192 contemplates deduction only in cases where the salary accrues and the same is paid to an employee; in other words, accrual as well as payment must co-exist in order to attract the provisions of Section 192 as is also held in (2001) SCC OnLine AP
886. Incentive provisions are to be construed liberally
10. Without prejudice to the above, the learned CIT(A) erred in not appreciating that when the Legislature brings in the statute an incentive provision for the encouragement or advancement of a specific purpose, activity or objective, then such provision has to be liberally interpreted so as to advance the purpose behind it.
11. The learned CIT(A) thus erred in not appreciating that incentive provision like section 10(5) should be construed in a liberal and purposive manner, meaning thereby that the Assessing Officer, in such cases, should adopt a liberal and broad-minded approach, so as to fulfill the objective of the legislation and not in a manner as to snatch away the benefit intended to be given by the Legislature.
Interpretation favorable to the appellant to be adopted
12. Without prejudice to the above, the learned CIT(A) erred in not appreciating that it is a well settled principle in law that if two views are possible then the view which is favorable to the appellant is to be adopted.
Thus, the learned CIT(A) erred in not accepting the favorable view that LFC reimbursements, involving foreign leg restricted only to designated place
India portion is not taxable under section 10(5) read with Rule 2B.
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ITA No. 2886 & 2887/Mum/2024
A.Y. 2016-17
State Bank of India Linking Road & SBI AO West Mumbai Branch
Exemption for Indian leg
13. Without prejudice to the above, the learned CIT(A) erred in not appreciating that if at all the LFC payments involving a foreign leg are to be held as taxable, the employee is entitled for exemption under section 10(5) to the extent of expenses incurred for travel in India where the employee's designated place is in India and he actually visits the designated place in India.
as designated.
Tax Rate and Interest under section 201(1A)
14. Without prejudice to the above, the learned CIT(A) erred in upholding the action of the TDS Officer in computing interest under section 201(1A) for the actual period of default.
Leave fare concession
1. The learned CIT(A) erred in confirming the 201(1A) order of the TDS officer and thereby holding the appellant as an assessee in default on account of non- deduction of tax at source in respect of leave fare concession [LFC] provided by the appellant to certain employees of INR 4,30,870, where LFC was paid for a journey where the designated place was in India but the same also involved some en-route foreign travel being undertaken by the employee.
2. The learned CIT(A) erred in not appreciating that the benefit of exemption under section 10(5) is available to the appellant's employees' even in cases where the journey undertaken by an employee involves a foreign leg, as employee's designated place is in India only and he actually visits the designated place in India.
Ruling of the Madras High Court
3. The learned CIT(A) erred in not appreciating that the Bank did not deduct tax at source on the reimbursement of LFC amounts to its employees under the specific directions of the Hon'ble High Court of Madras in its Interim Order dated 16.02.2015 in W.P. No. 11991 of 2014. 4. The learned CIT(A) erred in not appreciating that in terms of the directions of the Hon'ble High Court of Madras, the amount of LFC paid to the employees would not amount to income for the purpose of deducting tax at source and if the writ petition is dismissed, the employees would be liable to pay tax on the amount of LFC paid by the Bank.
5. The learned CIT(A) erred in not appreciating that the directions given by the Hon'ble High Court of Madras are binding on the Bank and had the Bank deducted the tax at source, it would have been contrary to the Hon'ble High
Court order, which could have amounted to contempt of Court order.
ITAT ruling in Bank's own case
6. Without prejudice to the above, the learned CIT(A) erred in not following the decision of the juri ictional Mumbai Bench of the Income-tax Appellate
Tribunal [ITAT] [123 taxmann.com 447] in Bank's/Appellant own case. Thus, the fact that an identical subject matter has been decided in favor of the Appellant Bank by a juri ictional appellate authority (i.e. the Hon'ble ITAT -
Mumbai), was not appreciated by the learned CIT(A).
Bona fide belief
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ITA No. 2886 & 2887/Mum/2024
A.Y. 2016-17
State Bank of India Linking Road & SBI AO West Mumbai Branch
The learned CIT(A) erred in not appreciating that the appellant was of the bona fide belief that it was not liable to deduct tax at source in respect of LFC reimbursements provided to employees and accordingly, the appellant cannot be held to be an assessee in default within the meaning of section 201. 8. The learned CIT(A) erred in not appreciating that in terms of section 192 once an employer has honestly and fairly formed an opinion and arrived at the estimated taxable income and applied TDS accordingly, it cannot be considered as an assessee in default. 9. The learned CIT(A) erred in not appreciating that section 192 contemplates deduction only in cases where the salary accrues and the same is paid to an employee; in other words, accrual as well as payment must co-exist in order to attract the provisions of Section 192 as is also held in (2001) SCC OnLine AP 886. Incentive provisions are to be construed liberally 10. Without prejudice to the above, the learned CIT(A) erred in not appreciating that when the Legislature brings in the statute an incentive provision for the encouragement or advancement of a specific purpose, activity or objective, then such provision has to be liberally interpreted so as to advance the purpose behind it. 11. The learned CIT(A) thus erred in not appreciating that incentive provision like section 10(5) should be construed in a liberal and purposive manner, meaning thereby that the Assessing Officer, in such cases, should adopt a liberal and broad-minded approach, so as to fulfill the objective of the legislation and not in a manner as to snatch away the benefit intended to be given by the Legislature.
Interpretation favorable to the appellant to be adopted
12. Without prejudice to the above, the learned CIT(A) erred in not appreciating that it is a well settled principle in law that if two views are possible then the view which is favorable to the appellant is to be adopted.
Thus, the learned CIT(A) erred in not accepting the favorable view that LFC reimbursements, involving foreign leg restricted only to designated place
India portion is not taxable under section 10(5) read with Rule 2B.
Exemption for Indian leg
13. Without prejudice to the above, the learned CIT(A) erred in not appreciating that if at all the LFC payments involving a foreign leg are to be held as taxable, the employee is entitled for exemption under section 10(5) to the extent of expenses incurred for travel in India where the employee's designated place is in India and he actually visits the designated place in India.
as designated.
Tax Rate and Interest under section 201(1A)
14. Without prejudice to the above, the learned CIT(A) erred in upholding the action of the TDS Officer in computing interest under section 201(1A) for the actual period of default.
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ITA No. 2886 & 2887/Mum/2024
A.Y. 2016-17
State Bank of India Linking Road & SBI AO West Mumbai Branch
Since identical issues are involved in both the appeals, these are being disposed of by a common order and ITA No. 2887/Mum/2024 is taken as the lead case. 4. Brief facts are that ACIT (TDS) circle 2(2), Mumbai passed an order u/s 201(1)/201(1A) of the Act dated 22.03.2023 treating the assessee ‘in default’ on account of non-deducation of Tax at Source (TDS) in respect of Leave Fare Concession (LFC) provided by it to certain employees where the same involved en-route foreign travel undertaken by these employees while claiming LFC for end destination within the country. Accordingly, total non-deduction of tax u/s 201(1A) was worked out at Rs. 50,964/- and interest u/s 201(IA) was determined at Rs. 48,925/-, resulting in total TDS default of Rs. 99,889/-. 5. Aggrieved with the order of Ld. AO, the assessee preferred an appeal before the Ld. CIT(A). Vide order dated 21.03.2024, Ld. CIT(A) dismissed the appeal, subject to the following directions: “i. The recovery of tax must be stayed by the AO till the stay of the Apex Court is vacated. ii. The appellant is advised to file petition u/s 119 (2) (a) of the Act for waiver of interest charged u/s 201(1A) (i) of the Income-tax Act, 1961 for the period, recovery of TDS was stayed by the High Court and Supreme Court.
iii. The appellant is directed to file the computation of income and TDS rate applicable to each employee separately and the AO must rectify the order and reduce excess demands raised if any.”
Aggrieved with the order of Ld. CIT(A), the assessee filed an appeal before the Tribunal. Before us, Ld. AR has submitted that the assessee was bound by P a g e | 7
ITA No. 2886 & 2887/Mum/2024
A.Y. 2016-17
State Bank of India Linking Road & SBI AO West Mumbai Branch the specific directions of the Hon’ble High Court of Madras vide order dated
16.02.2015 in W. P. No. 11991 of 2014, and therefore, did not deduct the TDS.
Ld. AR reiterated that the bank should not be treated as an ‘assessee in default’
as deduction of tax under such circumstances would have amounted to contempt of court. In this regard, the assessee has submitted the following chronology of events in its written submissions filed along with a paper book:
Date/Page
Nos. of the paper book
Event
Particulars
07 April 2014
(01 of the paperbook)
Circular dated 07 April
2014 issued by the Indian
Banks Association ["IBA"]
to all its public sector member banks
IBA vide its Circular intimated the Member
Banks that its Managing Committee has decided that the Officers/employees of member Banks shall not be entitled to visit overseas countries as part of Leave Travel
Concession /Home Travel Concession
["LTC/HTC"] and advised the Members Banks to do the needful accordingly.
15 April 2024
(02 of the paperbook)
Circular dated 15 April
2014 issued by the Appellant to all its Branches.
In compliance of the above directives, the Appellant vide its Circular communicated to all its Branches that the Officers/ employees shall not be entitled to visit overseas countries as part of LTC/HTC and that the revised instructions will come into force with immediate effect.
30 April 2014
(03 of paper book)
Letter dated 30 April 2014
issued by the Department of Financial Services of the Ministry of Finance to all the Chairmen and Managing Directors
["CMD's"] of public sector financial banks/institutions, etc
Thereafter, the Ministry of Finance,
Department of Financial Services vide letter dated 30 April 2014 addressed to the CMDs of the Public Sector Banks and Financial
Institutions Intimated that pursuant to the directions of the Chief Vigilance Commissioner in his letter dated 8 October 2013, the matter had been examined and it was decided that Public Sector Banks and Financial Institutions may be advised to formulate Leave Trave
Concession / Leave Travel Allowance
('LTC/LTA') schemes. The said Scheme inter- alia cover the following:
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ITA No. 2886 & 2887/Mum/2024
A.Y. 2016-17
State Bank of India Linking Road & SBI AO West Mumbai Branch
•
travel to foreign destinations, including travel via foreign destinations while availing LTC facility may not be allowed.
Writ Petition No. 11991
of 2014 filed by All India
State Bank Officers
Federation, All India Bank
Officers Confederation and one Мг.
Bhavanisankar K. with the Hon'ble Madras High
Court.
Circulars dated 07 April 2014 and 15 April
2014 (as enumerated at Sr. Nos. 1 and 2 of the table above) were challenged by the All India State Bank Officers' Federation and the All India Bank Officers' Confederation by filing a Writ Petition before the Hon'ble Madras
High Court (WP No. 11991 of 2014).
25 April 2024
14 to 16 of the paper book)
Interim Order dated 25
April 2014 passed by the Hon'ble Madras High
Court in WP. No. 11991 of 2014. The Hon'ble Madras High Court vide its Order dated 25 April 2014, granted an interim stay on the operation of the impugned Circulars in view of the undertaking given by the Petitioners. The relevant extract of the Order
25 April 2014 passed by the Single Judge
Bench of the Hon'ble Madras High Court is reproduced hereunder:
....... Today, the petitioners have filed an affidavit before this Court wherein they have stated in paragraph Nos. 2 & 3 as follows:
The petitioners have sought for interim stay of the impugned circular dated 07.04.2014
issued by the third respondent read with the e-circular dated 15.04.2014 issued by the first respondent and signed by the second respondent by which LTC to cover foreign travel has been withdrawn........"
"The petitioners hereby give an undertaking that if an interim stay is granted and later the writ petition is dismissed, the amount paid towards LTC to cover foreign/overseas travel to our member-officers will be refunded by the individual officers concerned.........
"....4. Having regard to the undertaking given by the petitioners and having regard to the rule position, there shall be an order of interim stay until 12.06.2014.....
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ITA No. 2886 & 2887/Mum/2024
A.Y. 2016-17
State Bank of India Linking Road & SBI AO West Mumbai Branch
16 February
2015 (37 to 41 of the paperbook)
Interim Order dated 16
February 2015 passed by the Hon'ble Madras High
Court in WP No. 11991 of 2014. On 16 February 2015, the interim stay granted by the Hon'ble High Court earlier was extended till the disposal of the Writ Petition.
The relevant extract of the Order dated 16
February 2015 is reproduced hereunder:
"The interim order granted by this Court is explained to the effect that any amount paid to the petitioner towards LFC or 25
reimbursement of LFC pursuant to the impugned order would not amount to income so as to enable the Bank to deduct tax at source. It is made clear that if the writ petition is dismissed, the employees are liable to pay tax on the amount paid by the Bank."
29 April 2015
(43 to 49 of the paper book)
Affidavit filed by the Appellant in the WP No.
11991 of 2014. The Appellant filed an Affidavit with the Hon'ble High Court inter-alia pointing out that the Order dated 16 February 2015 deals with provisions relating income-tax and tax deduction at source and hence the Petitioners ought to have made the Ministry of Finance, the Central Board of Income-tax and the Commissioner of Income-tax as Respondents in the Writ Petition.
It was also submitted that in the absence of these three authorities as parties to the Writ
Petition, the order restraining deduction of tax at source in respect of LFC paid would cause difficulties in implementation apart from creating complications In satisfying requirements prescribed in the provisions of the Income-tax Act, 1961. 24 June 2022
( 54 to 105
of the paper book)
Final Order dated 24 June
2022 passed by the Single
Bench of the Madras High
Court in WP No. 11991 of 2014. In terms of this Order, the Hon'ble High Court dismissed the Writ Petition filed by the Petitioners and upheld the validity of the Circulars dated 07 April 2014 and 15 April
2014. It may be noted that it was only on 24 June
2022 i.e., much after the date of reimbursement of LFC for the year under consideration by the Appellant to its employees, that the Writ Petition filed before the Hon'ble High Court of Madras was P a g e | 10
ITA No. 2886 & 2887/Mum/2024
A.Y. 2016-17
State Bank of India Linking Road & SBI AO West Mumbai Branch dismissed and the validity of the said two circulars upheld.
106 to 111 of the paper book)
Writ Appeal No. 1653 of 2022 filed of by the All India State Bank Officers
Federation, the All India
Bank Officers
Confederation and one
Mr. K. Bhavanisankar to the Hon'ble Madras High
Court.
The Petitioners filed a further Writ Appeal
(WA No. 1653 of 2022) to the Hon'ble Madras
High Court challenging the Order dated 24
June 2022 passed by the Single Judge Bench.
08 August
2022 (112 to 114 of the paper book)
Order dated 08 August
2022 passed by the Division Bench of the Hon'ble Madras High
Court in WA No. 1653 of 2022. admitting the writ appeal.
On 08 August 2022, the following order was passed by the Division Bench of the Hon'ble
Madras High Court:
"....7. Consequently, it is ordered that, the appellant Federation / officers are protected to the extent that, during pendency of this appeal, no recovery shall be effected from their salary and also that, no consequential coercive proceedings shall be instituted by any of the authorities against them.
08 June 2023
(115 to 127
of the paper book)
Order dated 08 June 2023
passed by the Division
Bench Hon'ble of Madras
High Court in WA No.
1653 of 2022. The Hon'ble Madras High Court vide its Order dated 08 June 2023 allowed Writ Appeal No.
1653/2022 and quashed the Circulars dated
07 April 2014 issued by IBA and 15 April 2014
issued by the Appellant in connection with revised LFC instructions and remanded the matter to the authority for fresh consideration.
Special Leave Petition filed by the Appellant to the Hon'ble Supreme
Court (SLP Diary No.
16734/2023
The Appellant filed a Special Leave Petition to the Hon'ble Supreme Court challenging the Order dated 08 June 2023 passed by the Division Bench of the Hon'ble Madras High
Court.
28 August
2023 ( 128
to 129 of the paper book)
Order dated 28 August
2023 passed by the Hon'ble Supreme Court granting a stay on the operation of the Order dated 08 June 2023
passed by the Hon'ble
Madras High Court.
The Hon'ble Supreme Court vide order dated
28 August 2023 granted a stay on the operation of the Order dated 08 June 2023
passed by the Hon'ble Madras High Court and directed the Appellant to not make any recoveries from its employees during the pendency of the SLP.
The said SLP is, as yet, pending adjudication and this issue as not attained finality.
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ITA No. 2886 & 2887/Mum/2024
A.Y. 2016-17
State Bank of India Linking Road & SBI AO West Mumbai Branch
As evident from the aforesaid chain of events, the Appellant was bound by the directions of the Madras High Court to not deduct tax at source on the LFC paid to its employees.
Prior to the introduction of the Circulars dated 07 April 2014 and 15 April 2014, the Appellant paid LFC to its employees which was claimed as exempt by the employees. Only after introduction of the aforesaid Circulars, the Appellant was prohibited from paying LFC to its employees for visiting overseas countries.
In fact, the Division Bench of the Hon'ble Madras High Court vide its Order dated 08 June 2023 dismissed the challenge to the validity of the Circulars dated 07 April 2014 and 15 April 2014. Thus, only in June 2023, the validity of the Circulars was upheld which again it is submitted is under dispute since the SLP filed by the Appellant is still pending adjudication before the Hon'ble Supreme Court.
Thus, it is submitted that the Appellant cannot be faulted for any act, which could not be completed at the relevant point in time due to the specific directions of the Court, which were binding on the Bank and violation of which, would have rendered the Bank liable for contempt of Court.
In view of the above, it is submitted that the Appellant was under a bonafide belief for non-deduction of tax at source duly bound by the directions of the Hon'ble Madras High Court and hence it cannot be considered as an 'assessee in default' in terms of section 201(1) of the Act. It is further submitted that the Appellant itself in terms of the Affidavit filed with the Hon'ble Madras High Court pointed out that the Petitioners of the Writ Petition ought to have impleaded the income-tax authorities as parties to said Writ Petition since the interim orders passed by the High Court would have income-tax implications including provisions relating to tax deduction at source.
Reliance in this regard is placed on the recent decision of the Agra Bench of the Tribunal in the Appellant's Bank own case (ITA No. 514/Agr/2024 dated 28 March 2025 for A.Y. 2016-17 itself) (copy attached to this Note refer Appendix - A) wherein too the Tribunal considering the stay granted by the Madras High Court has held that the Appellant was under an obligation not to deduct tax at source and hence it cannot be held to be an assessee in default for non-deduction of tax at source on impugned LFC payments.
Without prejudice to the foregoing, it is submitted as under:
The CIT(A) vide Order dated 21 March 2024 also has taken cognizance of this fact that final position with respect to LFC already paid to the employees (including the foreign leg) will be clear only once the Hon'ble Supreme Court decides this issue. The relevant extract of the Order dated 21 March 2024 is reproduced hereunder [refer page Nos. 19 & 20 of the CIT(A) Order]:
The next question is if the Apex Court overrules the decision of the Hon'ble Division
Bench of the Madras High Court dated 07.04.2014 (sic) and restores the decision dated 08.08.2022 (sic), Hon'ble High Court of Madras in Writ Petition (11991/2014).
Then, the Bank will be eligible to recover the whole of the LTC reimbursed and then
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ITA No. 2886 & 2887/Mum/2024
A.Y. 2016-17
State Bank of India Linking Road & SBI AO West Mumbai Branch no TDS will be applicable. But the existing law and decision has to be implemented as on date the bank is liable to deduct TDS on LTC amount granted/ reimbursed.......
Hence, it is submitted that in case the Hon'ble Supreme Court decides the SLP in favour of the Appellant, then it will have to recover the LTC granted to its employees and there will be no requirement to deduct tax at source. In light of the above and without prejudice to the primary argument of the Appellant-that no tax is required to be deducted on the LTC granted, it is submitted that this issue may be sent back to the files of the Assessing Officer to await the final outcome of the Hon'ble Supreme Court.
A similar view has been taken by the Kolkata Bench of the Tribunal in the Appellant's own case (ITA No. 1146/Kol/2024 dated 09 October 2024) wherein this issue has been sent back to the files of the Assessing Officer in light of the stay granted by the Hon'ble Supreme Court vide Order dated 28 August 2023 and the pendency of this issue before the Hon'ble Supreme Court
On the other hand, Ld. DR has strongly relied on the orders of lower authorities and has argued that the matter regarding exemption of LFC has been subsequently decided by the Hon’ble Apex Court against the bank officers’ associations and, therefore, LFC claimed by the employees for visiting the foreign destinations enroute is taxable, and hence, the bank was liable to deduct TDS on the same. 8. We have heard the rival submissions and perused the material placed before us. We have also gone through various decisions of the coordinate benches cited by the assessee for the same assessment year, i.e. AY 2016-17. Specifically, in the case of State Bank of India v/s CIT(A) in ITA No. 514/Agr/2024, it has been held by the coordinate bench at Agra as under: 4. At the same time, it could be seen that the impugned payments pertain to LFC granted by assessee bank for the period 15-02-2016 to 24-02-2016 when the operation of interim order dated 16-02-2015 of Hon'ble High Court of Madras was in operation, the relevant portion of which read as under: - "6. The interim order granted by this court is explained to the effect that any amount paid to the petitioner towards LTC or reimbursement of LTC pursuant to the impugned
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ITA No. 2886 & 2887/Mum/2024
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State Bank of India Linking Road & SBI AO West Mumbai Branch order would not amount to the income so as to enable the bank to deduct tax at source. It is made clear that if the writ petition is dismissed, the employees are liable to pay tax on the amount paid by the bank."
The Hon'ble Court thus restrained the assessee bank not to deduct tax at source on such reimbursement. Finally, the decision has been rendered by Hon'ble High Court of Madras in case titled as All India State Bank Officers Association vs. SBI (140
Taxmann.com 221; dt. 14-06-2022) holding that withdrawal of additional facility would not infringe services rights or service conditions of officers of respondent bank and therefore, there was no perversity in respect of decision taken for withdrawal of additional concession granted to officers of respondent bank to travel abroad under LTC. It is thus clear that at the time of impugned payments, the interim order of Hon'ble High Court of Madras was in force which assessee bank was bound to follow.
We concur that assessee bank had no option but not to deduct TDS on such reimbursements as per the interim order of Hon'ble Madras High Court. The directions given by the Hon'ble High Court were binding on the assessee and had the assessee deducted tax at source on impugned payment, it would have been contrary to the orders of Hon'ble High Court which could have amounted to contempt of court order. Finally, the decision in the aforesaid case has been rendered by Hon'ble High
Court on 14-06-2022. Under these circumstances, we would hold that assessee bank, by interim order of Hon'ble High Court of Madras, was under an obligation not to deduct tax at source and therefore, the assessee could not be held to be assessee-in- default for non deduction of tax at source on impugned LFC payments. We order so.
The impugned demand as raised against the assessee stand deleted.”
As the facts in the present case are identical, respectfully following the above decision of the coordinate bench, we hereby hold that the assessee cannot be treated as ‘assessee in default’, as directions of the Hon’ble High Court of Madras issued vide order dated 16.02.2015 were binding on the assessee during the period under consideration. Accordingly, the demand raised by Ld. AO against the assessee u/s 201(1)/201(A) is without any justification and is hereby deleted. . Accordingly, the appeal of the assessee is allowed.
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ITA No. 2886 & 2887/Mum/2024
A.Y. 2016-17
State Bank of India Linking Road & SBI AO West Mumbai Branch
10. Since facts in this appeal are the same as in ITA No. 2887/Mum/2024, the above order shall apply mutatis mutandis to this appeal also.
11. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 30.05.2025. SANDEEP GOSAIN
RENU JAUHRI
(न्यधनयक सदस्य/JUDICIAL MEMBER)
(लेखधकधर सदस्य/ACCOUNTANT MEMBER
Place: म ुंबई/Mumbai
दिन ुंक /Date 30.05.2025
अननकेत स ुंह र जपूत/ स्टेनो
आदेश की प्रनतनलनि अग्रेनित/Copy of the Order forwarded to :
1. अपीलार्थी / The Appellant
2. प्रत्यर्थी / The Respondent.
3. आयकर आयुक्त / CIT
4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT,
Mumbai
5. गार्ड फाईल / Guard file.
सत्यानित प्रनत ////
आदेशािुसार/ BY ORDER,
सहायक िंजीकार (Asstt.