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Facts
A TDS survey revealed that the appellant bank did not deduct TDS on LTC/LFC reimbursements to employees where journeys included foreign legs, claiming exemption under Section 10(5). The Assessing Officer (AO) issued a notice and order holding that such reimbursements were not exempt due to foreign travel, and thus, TDS was deductible.
Held
The Tribunal held that the orders passed by the AO were barred by limitation as they were beyond the prescribed time limit for passing orders under Section 201(1)/201(1A) of the Income Tax Act. The appeals related to A.Y. 2013-14 and 2014-15 were allowed for statistical purposes, while other appeals were dismissed.
Key Issues
Whether the orders passed by the AO for non-deduction of TDS on LTC/LFC reimbursements were within the period of limitation prescribed under Section 201(3) of the Income Tax Act. Whether foreign travel is covered under the exemption provided by Section 10(5) for LTC reimbursements.
Sections Cited
10(5), 133A, 201, 201(1), 201(1A), 201(3), 192(1)
AI-generated summary — verify with the full judgment below
सुनवाई की तारीख/Date of Hearing : 12/03/2025 उदघोषणा की तारीख/Date of Pronouncement : 25/03/2025 आदेश/Order PER BENCH: These are connected appeals for the A.Y’s 2013-14 , 2014-15 & 2016-17 filed by the Assessee against the separate orders of different Ld. CIT(A)/NFAC at various stations as per following details: Sl.No. Appeal No. Name of Case CIT(Appeal / s ) Order dt.
State Bank of India CIT(A)/ NFAC, Delhi 19/09/2022 2. State Bank of India CIT(A)/ NFAC, Delhi 19/09/2022 3. State Bank of India CIT ADDL/JCIT(A)Prayagraj 26/12/2023 4. State Bank of India CIT ADDL/JCIT(A)Prayagraj 26/12/2023 5. State Bank of India CIT ADDL/JCIT(A)Prayagraj 20/12/2023 6. State Bank of India CIT ADDL/JCIT(A)-1 Coimbatore 21/03/2024 7. State Bank of India CIT ADDL/JCIT(A)-1 Coimbatore 21/03/2024 8. State Bank of India CIT ADDL/JCIT(A)-1 Coimbatore 21/03/2024 9. State Bank of India CIT ADDL/JCIT(A)-1 Coimbatore 21/03/2024 10. State Bank of India CIT ADDL/JCIT(A)-1 Coimbatore 21/03/2024 11. State Bank of India CIT ADDL/JCIT(A)-1 Coimbatore 21/03/2024 12. State Bank of India CIT ADDL/JCIT(A)-1 Coimbatore 21/03/2024 2. At the outset the Registry has pointed out that all the above appeals are barred by limitation.
After considering the condonation application filed by the assessee in all the above appeals, we condone the delay for which sufficient cause is shown, and admit all the appeals for adjudication.
Since the issues involved in all the above appeals are common and were heard together so they are being disposed off by this consolidated order for the sake of convenience and brevity.
With the consent of both the parties we take up the appeal in for the A.Y. 2013-14 as a lead case wherein the assessee has raised the following grounds:
1. The impugned order is both against facts and erroneous in law.
2. On the facts and circumstances of the case, the Ld.CIT(Appeals) NFAC, Delhi, has erred in having dismissed the assessee's appeal ex-parte without having afforded reasonable opportunity of being heard and thus the impugned order is against principle of natural justice.
4 3. On the facts and circumstances of the case the Ld. CIT(Appeals),NFAC, has erred in having confirmed the order of the Ld. AO passed u/s 201(1) & 201(1 A) of the Income Tax Act, deeming the assessee to be "assessee in default" for failure to deduct tax on reimbursement made towards payments on account of foreign visits on LTC/LFC.
4. On the facts and circumstances of the case the Ld.CIT(Appeals) NFAC, has erred in having confirmed the order of the Ld.AO passed u/s 201(1) & 201(1 A) of the Income Tax Act, holding that the assessee is liable to pay a demand of Rs.33,86,010/- u/s 201(1) and an interest of Rs.22,52,334/- u/s 201(1 A) of the Income Tax Act, aggregating to total tax liability at Rs.56,38,344/-. Besides the above issues, the assessee had raised additional ground before us which read as under: “Ground No. 5: On the facts and circumstances of the case the Ld. CIT(Appeals) NFAC, Delhi, has erred in having not decided the Ground No. 1 taken in first appeal before the first appellate authority challenging the legality of order passed by the Ld. Assessing Officer on ground of limitation.”
Briefly the facts of the case are that a TDS survey under Section 133A was conducted at the appellant’s Local Head Office, Chandigarh, on 12.01.2018, revealing that the appellant did not deduct TDS on LTC/LFC reimbursements to employees where journeys included foreign legs, claiming exemption under Section 10(5) of the Act. The AO issued a notice on 16.02.2018, followed by an order on 31.03.2018, holding that such reimbursements were not exempt under Section 10(5) as the journeys involved foreign travel, and thus, TDS was deductible. The appellant argued that it complied with Section 10(5) and Rule 2B, as the designated travel destination was within India, and relied on judicial precedents and a clarificatory order from the Madras High Court (dated 16.02.2015) in Writ Petition No. 11991 of 2014. The CIT(A) dismissed the appeal ex-parte, citing non-response to notices issued on 26.12.2020, 17.08.2022, and 01.09.2022, and upheld the AO’s order, relying on decisions of the Karnataka High Court and various ITAT benches.
At the outset the Ld.AR had drawn our attention to the additional ground raised by the assesse which is reproduced herein above. 7.1 It was submitted by the Ld. AR that in the present case the inspection / survey was happened in the premise’s of the assessee on 12/01/2018 and some violation was found and noticed by the officers of the Revenue and thereafter, the proceedings under section 201 were initiated for non-deduction of tax by the person responsible. It was submitted by the Ld. AR that the action carried out by the officer was beyond the period of time as provided under section 201(3) of the Act and 5 therefore all the actions taken by the AO for the A.Y. 2013-14 and 2014-15, were beyond the period of limitation, therefore cannot be sustained.
With respect to the Ground No. 2 to 4 in the appeal are concerned it was submitted by the Ld. AR that the issue is covered against the assessee by the decision of the Hon’ble Supreme court in the case of State Bank of India Vs Assistant Commissioner of Income-tax[2022] 144 taxmann.com 131 (SC).
9. Per contra the Ld. DR had submitted the issue is already covered in favour of the Revenue by the decision of Hon’ble Supreme Court in case of SBI (supra), therefore all the appeals alongwith the appeals for the A.Y. 2013-14 and 2014-15 are required to be dismissed.
We have heard the rival contention and perused the material available on the record.
Firstly we will deal with the issue of A.Y 2013-14 & 2014-15. In this regard the submissions of the assessee are mentioned hereinabove. The Ld. AR had already submitted that the identical issue was considered by the Coordinate Bench in case of Lifestyle International (P.) Ltd. Vs. Assistant Commissioner of Income-tax [2022] 141 taxmann.com 559 (Bangalore - Trib.) wherein the Coordinate Bench has decided the issue in favour of the assessee which is as under: 8. We heard the rival submissions and perused the materials on record. Sub-section (3) to section 201 of the Act, as was made available on the statute vide the Finance Act, 2009 w.e.f. 1-4-2010, reads as under : "(3) No order shall be made under sub-section (1) deeming a person to be an assessee in default for failure to deduct the whole or any part of the tax from a person resident in India, at any time after the expiry of -
(i) two years from the end of the financial year in which the statement is filed in a case where the statement referred to in section 200 has been filed; (ii) four years from the end of the financial year in which payment is made or credit is given, in any other case" (Emphasis supplied)"
In so far the time limit for passing of an order u/s. 201(1) of the Act in a case where statement of tax deducted at source u/s. 200 of the Act was not filed by the deductor, the same was thereafter extended vide the Finance Act, 2012 from 4 years as was earlier provided in clause (ii) to section 201(3) of the Act to a period of 6 years with retrospective effect from 1-4-2010, i.e., from AY 2010-11 onwards. However, the time limit for deeming a person to be an assessee-in-default for failure to deduct the whole or any part of the tax from a person resident in India, in a case where a statement of tax deducted at source u/s. 200 of the Act was filed by the deductor remained unchanged i.e. 2 years as was earlier provided on the statute vide the Finance Act, 2009 w.e.f. 1-4-2010. We find that the aforesaid time limit for deeming a person to be an assessee-in- default within the meaning of section 201(1) of the Act, had thereafter further been extended vide the Finance Act, 2014 w.e.f. 1-10-2014 to a period of 7 years from the end of the financial year in which payment is made or credit is given.
10. Before proceeding further it would be important to examine based on facts whether the time limit for deeming the assessee as an assessee-in-default u/s. 201(1) of the Act is regulated by the time period as mentioned in clause (i) of section 201(1) as claimed by the assessee, or the extended time period of 6 years as per clause (ii) of section 201(1) as was prevalent prior to the Finance Act, 2014, i.e. prior to 1-10-2014, as claimed by the revenue. For this purpose it would be relevant to cull out the respective dates on which the statements referred to in section 200 of the Act had been filed by the assessee company, as under :— Assessment year 2013-14 Assessment year 2014-15 Date of filing Form No Quarter Date of filing Form No Quarter 14-7-2013 26Q Q1 13-7-2012 26Q Q1 15-10-2013 26Q Q2 15-10-2012 26Q Q2 15-1-2014 26Q Q3 15-1-2013 26Q Q3 15-5-2014 26Q Q4 15-5-2013 26Q Q4
11. In the assessee's case, the assessee has deducted tax and has filed statements well within the time limit as prescribed in section 200 of the Act. We are of the considered view, that as the time limitation for passing an order u/s. 201(1) deeming the assessee, as an assessee-in-default could have validly been done within a period of 2 years from the end of the financial year in which the statement u/s. 200 was filed by the assessee, i.e. latest by 31-3-2016 for the assessment year 2013-14 and by 31-3-2017 for the assessment year 2014-15 as per the law as was then available on the statute. Therefore the order passed u/s. 201(1)/201(1A) for these assessment years on18-2-2020 is clearly beyond the time limit as per clause (i) of section 201(3). We, thus, in terms of our aforesaid observations quash the order passed by the AO u/s.201(1)/201(1A), dated 18-2- 2020 as barred by limitation. In the said case, the Coordinate Bench has quashed the assessment order dt. 18/02/2020 which was passed after a period of two years from the end of the Financial Year in which the statement under section 200 was filed by the assessee.
The assessee, vide application dt. 05/05/2025 had submitted that the additional evidence acknowledging the statement of TDS under section 200 (3) of the Act may kindly be accepted. The same was objected to by the Ld. DR on the pretext that the application is not maintainable at the appellate stage.
In our view the application for additional evidence before the Tribunal is to fulfil the condition mentioned in Rule 29 of ITAT Rules 1963 which provides as under:
Production of additional evidence before the Tribunal.
7 29. The parties to the appeal shall not be entitled to produce additional evidence either oral or documentary before the Tribunal, but if the Tribunal requires any document to be produced or any witness to be examined or any affidavit to be filed to enable it to pass orders or for any other substantial cause, or , if the income-tax authorities have decided the case without giving sufficient opportunity to the assessee to adduce evidence either on points specified by them or not specified by them, the Tribunal, for reasons to be recorded, may allow such document to be produced or witness to be examined or affidavit to be filed or may allow such evidence to be adduced.] 14. In the present case, the assessee had filed the challans showing the furnishing of statement of TDS for the relevant quarter of the A.Y. In the light of the above we deem it appropriate to admit the additional evidence now filed by the assessee before us.
Admittedly the Ld. CIT(A) has not decided the ground no. 1 of the assessee’s ground while adjudicating the appeal of the assessee. Admittedly the other grounds raised the by the assessee are decided by the Hon’ble Supreme Court in the case of SBI Vs. ACIT(supra) and therefore they are not required to be adjudicated separately being against the assessee.
With respect to the additional ground No. 1 and additional evidence which was admitted by us, we deem it appropriate to remand back the additional ground to the file of the Ld. CIT(A) with the direction to consider the additional documents admitted by us and the CIT(A) is further directed to adjudicate the ground no. 1 raised in the assessee appeal before it. In the light of above the appeal of the assessee for the A.Y 2013-14 & 2014-15 are remitted back to the file of the Ld. CIT(A) for the limited purpose of adjudicating the additional ground raised by the assessee before us.
In the result appeal filed by the assessee for the A.Y 2013-14 & 2014-15 is allowed for statistical purposes.
As far as the grounds raised
in 173/Chd/2024 ,421/Chd/ 2024, 493/Chd/ 2024, 622/Chd/ 2024 to 626,/chd/2024 , 643/Chd/ 2024 & 653/Chd/2024 are concerned the issues raised in the above mentioned appeals are already covered against the assessee by the decision of the Hon’ble Supreme Court in the case of SBI (supra) and the Hon’ble Supreme Court has rejected the contention of the Bank ,the 8 Hon’ble Supreme Court in case of State Bank of India Vs Assistant Commissioner of Income-tax[2022] 144 taxmann.com 131 (SC)wherein in Para 14 to 17 held as under: …14. The second argument urged by the appellant that payments made to these employees was of the shortest route of their actual travel cannot be accepted either. It has already been clarified above, that in view of the provisions of the Act, the moment employees undertake travel with a foreign leg, it is not a travel within India and hence not covered under the provisions of section 10(5) of the Act.
15. A foreign travel also frustrates the basic purpose of LTC. The basic objective of the LTC scheme was to familiarise a civil servant or a Government employee to gain some perspective of Indian culture by traveling in this vast country. It is for this reason that the 6th Pay Commission rejected the demand of paying cash compensation in lieu of LTC and also rejected the demand of foreign travel. In para 4.3.4 of the 6th Pay Commission Report dated March, 2008 this is what was said :- "4.3.4 The demand for allowing travel abroad at least once in the entire career under the scheme is not in consonance with the basic objective of the scheme. The Government employee cannot gain any perspective of the Indian culture by traveling abroad. Besides, the attendant cost in foreign travel would also make the expenditure under this scheme much higher. The Commission is, therefore, not inclined to concede the demand to allow foreign travel under LTC." This is also an objection of the Revenue which has been raised in its counter affidavit filed by respondent no. 1-Assistant Commission of Income-tax wherein the Revenue has asserted that the provision for LTC was introduced to motivate employees and encourage its employees towards tourism in India and it is for this reason that reimbursement of LTC was exempted. There was no intention of legislature to allow the employees to travel abroad in the garb of LTC available by virtue of Section 10(5) of the Act. Therefore, the Revenue has a valid objection (apart from other objections which are clearly violative of the Statute), that the intention and purpose of the scheme is also violated in the garb of tour within India, foreign travel is being availed.
16. The aforementioned order passed by the CIT(A) has rightly held that the obligation of deducting tax is distinct from payment of tax. The appellant cannot claim ignorance about the travel plans of its employees as during settlement of LTC Bills the complete facts are available before the assessee about the details of their employees' travels. Therefore, it cannot be a case of bona fide mistake, as all the relevant facts were before the Assessee employer and he was therefore fully in a position to calculate the 'estimated income' of its employees. The contention of Shri K.V. Vishwanathan, learned senior advocate that there may be a bona fide mistake by the assessee- employer in calculating the 'estimated income' cannot be accepted since all the relevant documents and material were before the assessee- employer at the relevant time and the assessee employer therefore ought to have applied his mind and deducted tax at source as it was his statutory duty, under section 192(1) of the Act.
17. In conclusion we do not find any reason to interfere with the order passed by the Delhi High Court. The appeal is dismissed
Since the issue raised in 173/Chd/ 2024 ,421/Chd/ 2024, 493/Chd/ 2024, 622/Chd/ 2024 to 626,/chd/2024 , 643/Chd/ 2024 & 653/Chd/2024 is covered 9 against the assessee, therefore respectfully following the decision of the Hon’ble Supreme Court, we dismissed the abovementioned appeals of the assessee.
In view of the above the appeal nos. 173/Chd/ 2024 ,421/Chd/ 2024, 493/Chd/2024, 622/Chd/2024 to 626/Chd/2024, 643/Chd/2024 & 653/Chd/2024 are dismissed.