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Income Tax Appellate Tribunal, MUMBAI BENCHES “G”, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI M. BALAGANESH
O R D E R PER SAKTIJIT DEY, JM Captioned appeals by the same assessee arise out of two separate orders, both dated 10.12.2018, of learned Commissioner of Income Tax (Appeals)-60, Mumbai upholding the orders passed by the Assessing Officer under section 201(1) and 201(1A) of the Income Tax Act, 1961 in the matter of withholding of tax for the assessment years 2010-11 and 2011-12. 2. The common ground raised by the assessee in both the appeals read as under:- Assessment Years: 2010-11 & 2011-12 1. “Order under section 201(1) and 201(1A) barred by limitation 1.1. The learned CIT(A) erred in not holding that the order under section 201(1) and 201(1A) is barred by limitation and hence, void-ab-initio. 1.2. The learned CIT(A) erred in holding that provisions of section 201(3), as amended by Finance Act, 2014, are retrospective in nature and applies to the captioned assessment year. 1.3. The learned CIT(A) erred in not appreciating that for the purpose of the time limit mentioned in section 201(3), the date of filing the original TDS returns are relevant and not the correction statement. 1.4. The CIT(A) erred in not appreciating that section 201(3) refers to „statement‟ and no reference is made to „correction statement‟. Further, the learned DCIT had held the appellant to be „assessee‟ in default‟ on the basis that TDS is not deducted on LFC paid by referring to original statement and not correction statements. 1.5. The learned CIT(A) erred in making the followingobservations/ holding as under: “All the operational sections as per legal provisions will be applied de novo on this correction statement. Hence, for all purposes, the correction statement filed is as good as and equivalent to a statement filed u/s 200(3) of the Act. Once a correction statement is filed the inevitable effect is that, it partakes the character of statement filed u/s 200(3). In all such cases, the statements / correction statements are liable to be processed and scrutinized. In fact, all the proceedings on such correction statements filed will take place subsequently as is normally taken in cases where the original statement are filed.” The above observations are without any basis and are contrary to the facts of the case. The appellant objects to these observations / conclusions.
2. Leave fare concession 2.1. LFC involving en-route foreign travel 2.1.1. The learned CIT(A) erred in holding the appellant as assesse in default on account of non-deduction of tax at source in respect of leave fare concession [LFC] provided by the appellant to its employees amounting to Rs. 1,59,62,048 Assessment Years: 2010-11 & 2011-12 in cases where LFC was paid by the shortest route 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 2.1.2. 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, but where the employee's designated place is in India and he actually visits the place as designated. 2.1.3 The learned CIT(A) erred in relying on the Circular No. 8/2012 [F.No. 275/192/2012 1T(B)] dated 5 October 2012 issued by the Central Board of Direct Taxes for the purpose of tax deduction on salary payments for financial year 2012-13 for the captioned assessment year.
2.1.4. The learned CIT(A) erred in not appreciating that the appellant provided exemption under section 10(5) only when the employee‟s designated place is in India and he actually visit the place as designated. Further, even in cases where the employee travels outside India during the course of his travel to a place in India, the exemption under section 10(5) is restricted for travel within India. Further, all conditions under section 10(5) and Rule 2B are satisfied. 2.1.5. 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 place as designated. 2.2 LFC involving domestic travel by circuitous route 2.2.1. The learned CIT(A) erred in carrying out enhancement of assessment under section 251(1)(a) and holding the appellant as assessee in default in relation to claim of exemption of LFC paid to employees who have undertaken domestic travel. 2.2.2. The learned CIT(A) erred in holding that the appellant has submitted that out of the total domestic journey claim of Rs. 79,85,883, Rs. 52,79,750 is the amount of domestic journey claim where the circuitous journey is not performed by the shortest route. Assessment Years: 2010-11 & 2011-12 It is submitted that the amount of exemption provided to the employees under section 10(5) is after considering the shortest route to the designated destination. 2.2.3. The learned CIT(A) erred in not appreciating that the „shortest route‟ is a criterion to be taken into account for calculation of the maximum amount of exemption and not for the entitlement of exemption from income-tax itself.
Bona fide belief 3.1 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 provided to employees, and accordingly the appellant cannot be held to be an assessee in default within the meaning of section 201 and 201(1A).
Each one of the above grounds of appeal is without prejudice to the other.”
3. Briefly the facts are, the assessee before us is a branch of the largest public sector banking company in India viz. State Bank of India. In course of a survey conducted under section 133A of the Act to verify whether the assessee has complied with the tax withholding provisions regarding salaries/perks paid to the employees, The assessing (AO) found that certain employees have claimed leave fare concession (LFC) facility, wherein, travel to places even outside India was involved. It was noticed by the AO that some of the employees have taken circuitous route to one or more destination in India even involving travel abroad. Being of the view that LFC provided to the concerned employees was wrongly treated as exempt from taxation under section 10(5) of the Act and no tax was deducted on such payments to the employees, the AO proceeded to pass orders under section 201(1) and 201(1A) of the Act raising the following demands. Assessment Years: 2010-11 & 2011-12 Assessment year : 2010-11 Rs. 1,37,16,521/- Assessment year: 2011-12 Rs. 1,71,29,855/- 4. Against the aforesaid orders passed under section 201(1)/201(1A) of the Act, assessee preferred appeals before learned Commissioner (Appeals). However, by the impugned orders learned Commissioner (Appeals), by and large, has upheld the decision of the AO. Of course, learned Commissioner (Appeals) has granted partial relief to the assessee to the extent of reducing the demand raised by the AO by reducing an amount of Rs. 27,06,133/- in assessment year 2010-11. 5. Before us, learned Counsel for the assessee submitted, the issue is squarely covered by the orders of the Tribunal in assessee’s own case in assessment years 2008-09 and 2012-13. In this regard, he drew our attention to the relevant observations of the Tribunal. Further, he relied upon the following decision: 1. “CIT v. Onkarmal Meghraj (HUF) (1974) 93 ITR 233 (Supreme Court) 2. Oracle India Pvt. Ltd. v. DCIT (2016) 72 taxmann.com 138 (Supreme Court) 3. Oracle India Pvt. Ltd. v. DCIT(2015) 376 ITR 411 (Delhi High Court) 4. Oracle India Pvt. Ltd. v. DCIT (Writ Petition (C) No. 2061 of 2014) (Delhi High Court. 5. Tata Teleservices v. Union of India (2016) 385 ITR 497 (Gujarat High Court). 6. Noida Power Company Ltd. v. CIT (Writ Tax No. 150 of 2016) (Allahabad High Court).” Assessment Years: 2010-11 & 2011-12 7. Learned Departmental Representative, though, fairly submitted that the issue is covered by the decision of the Tribunal in assessee’s own case. However, he submitted that the fact, whether the assessee has paid LFC for the shortest route is not forthcoming either from the orders of the AO or learned Commissioner (Appeals). Drawing our attention to statement of facts filed before learned Commissioner (Appeals), learned counsel for the assessee submitted that LFC was paid to the employees for the shortest route by the entitled class to the destination in India. 8. We have considered rival submissions and perused the materials on record. It is observed, identical dispute regarding non withholding of tax on LFC paid to employees came up for consideration before the coordinate Bench in assessee’s own case in assessment years 2008-09 and 2012-13. While deciding the issue, the Tribunal has held as under:- “3. When these appeals were taken up for hearing, learned representative fairly agreed that the issue in appeal is now covered, in favour of the assessee, by a coordinate bench decision in assessee‟s own case {also reported at State Bank of India Vs ACIT [(2021) 123 taxmann.447 (Mum)]} wherein the coordinate bench has, infer alia, observed as follows: 7. As we proceed to adjudicate on connection of the impugned demands, it is important to bear in mind while dealing with the demands relating to a tax deduction of at source from payments of salaries that there is a subtle line of demarcation between what is taxable in the hands of the assessee and what is the amount of estimated income in respect of which tax is required to be deducted at source by the employer. Section 192 (1), which imposes tax withholding obligations on the employers in respect of payments for salaries, requires that tax deduction Is made by the employer "on the estimated income of the assessee under this head (i.e. income from salaries) for that financial year", Thus, the tax withholding obligation is clearly in respect of “estimated income of the assessee" and not in Assessment Years: 2010-11 & 2011-12 respect of "taxable income of the assessee". The mere fact of taxability of a payment in not in respect of “taxable income the hands of an assessee under this head”. Clearly, therefore, taxability of an income, in the hands of the employee concerned, under the head' income from salaries‟ per se is thus not sufficient to invoke the tax withholding obligations of the employer. There can be situations in which the employer genuinely and reasonably estimates income of the employees under the head salaries, and yet actual taxability of income under the head salaries of the related employees may be higher than employer's estimation. Therefore, while examining the question as to whether the employer has properly discharged his duties under section 192, all that is to be seen is whether the employer has reasonably, or bonafide, estimated the income of the employees and deducted tax in respect of such estimated income. As long as the conduct of the employer in this exercise is bonafide, he cannnot be said to be wanting in his conduct under section 192. Explaining this legal position, in the oft-quoted landmark judgment in the case of CIT v. Gwalior Rayon & Silk Mills Ltd. [(1983) 140 ITR 832 (MP)], Hon'ble Madhya Pradesh High Court „Judgment has, inter alia, observed that, "A duty is cast on an employer to form an opinion about the tax liability of his employee in respect of the salary income. While forming this opinion, the employer is undoubtedly expected to act honestly and fairly. But if it is found that the estimate made by the employer is incorrect, this fact alone, without anything more, would not inevitably lead to the inference that the employer has not accepted honestly and fairly. Unless that inference can be reasonably raised against an employer, no fault can be found with him. It cannot be held that he has not deducted tax on the estimated income of the employee". We humbly bow to the law so laid down by Their Lordships, and this, in our humble understanding, the correct and applicable legal position consistently followed by several coordinate benches of this Tribunal. There is not even a whisper of dissent on this point. It is in this light that we have, therefore, proceed further. The question that we need to, therefore, address is whether the action of the employer in not deducting tax at source from the leave travel facility in question could be said to be reasonable or bonafide. Let us, in this backdrop, take a look at the related legal provisions under section 10(5) read with rule 2 B: Section 10(5)exemption in respect of leave travel concession 10. In computing the total income of a previous year of any person, any Income falling within any of the following clauses shall not be included Assessment Years: 2010-11 & 2011-12 ** **
(5) in the case of an individual, the value of any travel concession or assistance received by, or due to, him,
(a) from his employer for himself and his family, in connection with his proceeding on leave to any place in India;
(b) from his employer or former employer for himself and his family, in connection with his proceeding to any place in India after retirement from service or after the termination of his service, subject to such conditions as may be prescribed (including conditions as to number of journeys and the amount which shall be exempt per head) having regard to the travel concession or assistance granted to the employees of the Central Government; Provided that the amount exempt under this clause shall in no case exceed the amount of expenses actually incurred for the purpose of such travel (remaining statutory provision not reproduced as it is not considered to be relevant for the present discussion) Conditions for the purpose of section 10(5) as prescribed under rule 2 B of the Income-tax Rules, 1962 2B. (1) The amount exempted under clause (5) of section 10 in respect of the value of travel concession or assistance received by or due to the individual from his employer or former employer for himself and his family, in connection with his proceeding-
(a) on leave to any place in India;
(b) to any place in India after retirement from service or after the termination of his service, shall be the amount actually incurred on the performance of such travel subject to the following conditions, namely:
(i) where the journey is performed on or after the Ist day of October, 1997, by air, an amount not exceeding the air economy fare of the national carrier by the shortest route to the place of destination;
(ii) where places of origin of journey and destination are connected by rail and the journey is performed on or after the 1st day of October, 1997, by any mode of transport other than by air, an amount not exceeding the air-conditioned first class rail fare by the shortest route to the place of destination; and (iii) where the places of origin of journey and destination or part thereof are not connected by rail and the journey is performed on or after the Ist day of October, 1997, between such places, the amount eligible for exemption shall be:- Assessment Years: 2010-11 & 2011-12 (A) where a recognised public transport system exists, an amount not exceeding the Ist class or deluxe class farc, as the case may be, on such transport by the shortest route to the place of destination; and (B) where no recognised public transport system exists, an amount equivalent to the air-conditioned first class rail fare, for the distance of the journey by the shortest route, as if the journey had been performed by rail. (remaining Statutory provision not reproduced as it is not considered to be relevant for the present discussion) 8. A plain reading of the above provisions does not indicate any requirement of taking the shortest route for travelling to “any place in India” or putting any kind of restrictions the route to be adopted for going to such a destination. Quite to the contrary, the statutory provisions do envisage the possibilities of someone taking a route other than the shortest route, as is implicit in the restriction that "an amount not exceeding the air economy fare of the national carrier by the shortest route to the place of destination" will only be eligible for exemption under section 10(5). What is essentially implies, to give a simple is that if someone is based in Mumbai and he decides to go to Delhi via let us say, Lucknow, Kolkata, or Chennai, the amount admissible for exemption under section 10(5) will be restricted to the price of direct flights between Mumbai and Delhi on the national carrier. This proposition is not even disputed by the income tax department. The question, however, arises whether when the same person goes to Delhi, via Dubai, the exempt leave travel concession being restricted to the price of Mumbai Delhi direct fight. Of course, the stand of the income tax department is that even the cost of the direct flight from Mumbai to Delhi, on the national carrier assuming that it is less than Mumbai-Dubai-Delhi airfare, will not be admissible leave travel assistance exemption in such a case. That is the approach approved by the coordinate benches as well, and, therefore, we need not question that at this stage. The relevant question, however, is not the actual status of taxation; the relevant question is whether the assessee employer could be said to unreasonable or malafide in proceeding on the basis that in such a situation also, the cost of a direct flight between Mumbai Delhi on national airlines will be available for exemption under section 10(5). When we look at the detailed statement of facts, extracts from which have been extensively reproduced by us earlier in this order, we do not find anything wrong or unreasonable in the conduct of the assessee employer. There is no specific bar in the - Jaw f the travel, eligible for exemption under section 10(5), involving a sector of as travel, and, in the absence of such a bar, Assessment Years: 2010-11 & 2011-12 the assessee employer cannot be faulted for not inferring such a bar. The reimbursement is restricted to airfare, on the national carrier, by the shortest route as is the mandate of rule 2B. The employee has actually travelled, as a part of that composite itinerary involving a foreign sector as well, to the destination in India. The guidance available to the assessee employer indicates that, in such a situation, the exemption under section 10(5) is available to the employee though to the extent of farthest Indian destination by the shortest route, and that is what the assessee employer has allowed. In the light of this analysis of the legal position and the factual backdrop, whatever may be the position with respect of taxability of such a leave travel concession in the hands of the employee, the assessee employer cannot be faulted for mot deducting tax at source from the leave travel concession facility allowed by him to the employees. As we hold so, we may add that we have not really addressed ourselves to the larger question with respect to the actual taxability of this leave travel concession in the hands of the employees concerned, even though we have our prima facie reservations on the coordinate benches decisions holding taxability of these amounts in the hands of the employees concerned, because that aspect of the matter is not really relevant as on now. We leave it at that for the time being. The coordinate bench decisions deal with only the issue of taxability of leave travel facility under section 10(5) and not with the broader question about the nature of tax deduction at source liability under section 192, as also the issue about bonafides of the stand of the assessee employer. These decisions, therefore, do not come in the way of our present decision. Once we hold, as we do in this case, that estimation of income, in the hands of the employees under the head‟ income from salaries', by the employer was bonafide and reasonable, the very foundation of impugned demands raised under section 201 r.w.s 192 ceases to hold good in law. We must, therefore, vacate these demands.
4. We see no reasons to take any other view of the matter than the view so taken by the coordinate bench. A copy of the said order is deemed to be attached to, and forming part of, this order as well. Respectfully following the same, we uphold the plea of the assessee and direct the Assessing Officer to delete the impugned demands raised under section 201 r.w.s.
192. The assessee gets the relief accordingly. The assessee has also raised some peripheral legal issues, including the issues with respect to the impugned orders being time barred but given the fact that the core issue has been, as decided, in favour of the assessee, it 1s not really necessary to deal with these peripheral issues.” Assessment Years: 2010-11 & 2011-12 9. Material facts involved in the impugned assessment years being identical, respectfully following the decision of the coordinate Bench as referred to above, we delete the demand raised by the AO and sustained by learned Commissioner (Appeals). At this stage, we must observe, the principle laid down by coordinate Bench would also apply to the issue raise in ground no. 2.2 of these appeals.
10. In view of our decision above ground no. 1 having become infructuous, there is no need for adjudication.