STATE BANK OF INDIA,JAIPUR vs. ACIT, JAIPUR

PER SHRI VIKRAM SINGH YADAV, A.M.

These are two appeals filed by the assessee against the order of the Ld.

CIT(A)-5, Jaipur dated 11.11.2016 for A.Y. 2013-14 & 2014-15 respectively.

The assessee has also filed two stay petitions in respect of demand raised by

the Assessing Officer of Rs.7,76,365/- for A.Y. 2013-14 & Rs.12,10,074/- for

A.Y. 2014-15. Since common issues are involved in these appeals and stay

petitions, the same were heard together and disposed off by this consolidated

order. For the purpose of discussion, we take up the appeal for A.Y. 2013-14

wherein the following grounds of appeal have been taken:

“1. The order of the learned CIT, on aspects agitated in this appeal, is bad in law, contrary to the provisions of law and facts of the case and without appreciation of the facts and circumstances of the case in their right perspective. 2

ITA No. 145 & 146/JP/17 and S.A. No.04 & 05/JP/2017 State Bank of India, Jaipur Vs. ACIT, TDS, Jaipur 2. The learned CIT erred in passing an order under section 201(1)/ 201(1A) and in raising demand of Rs.7,76,365/- (i.e. tax of Rs.5,95,675/- and interest of Rs.1,80,690/-) on the basis that tax was not deducted at source on payment of Leave Travel Concession.

“I have carefully considered the arguments put forth by the appellant. Regarding the argument of the Assessee that exemption u/s 10(5) is not limited to travel only within India and is applicable to a case involving foreign leg in the tour. It is seen that section 10(5) read with Rule 2B is very clear in intent that the said provisions are applicable in connection with proceeding on leave to any place in India. The appellant has in fact bent the interpretation of the said provisions in such a way which goes totally against the intent and spirit of these provisions. In all the cases involving foreign travel one designated place in India is just covered for name sake, otherwise almost entire journey is foreign travel for all practical purposes. In these circumstances, exemption u/s 10(5) would not be available.”

The above observations are without any basis and are contrary to the facts of the case. The appellant objects to these observations/ conclusions.

ITA No. 145 & 146/JP/17 and S.A. No.04 & 05/JP/2017 State Bank of India, Jaipur Vs. ACIT, TDS, Jaipur 5. Without prejudice to the above, the learned CIT erred in not appreciating the bona fide belief of the bank in granting benefit of Leave Travel Concession paid to the Bank’s employees who travelled out of India and held the Bank to be an assessee in default.

concession granted by the assessee bank to its employees and non-deduction

of TDS on the payment of leave travel concession by the assessee to its

employees and the corresponding interest thereon.

benefit of leave travel concession (LTC) to its employees.On 19.02.2014 &

ITA No. 145 & 146/JP/17 and S.A. No.04 & 05/JP/2017 State Bank of India, Jaipur Vs. ACIT, TDS, Jaipur 22.03.2014, a spot verification was conducted by the Asst. Commissioner of

Income-tax (TDS) Jaipur at the Zonal Office of the bank in Jaipur.In this

connection, a show cause notice dated 16.12.2014 and then another show-

cause dated 08.01.2015 was served upon the Assessee to provide details of

amounts used to travel out of India.In response to the Show Cause Notice,

the Bank filed its reply on 02.02.2015 as under:

S Name of Employee F.Y. 2012-13 No. Amount used TDS deducted and to travel out deposited on the of India amount 1 Shri K.M. Sharma 169026 0 2 Ashok Kumar Goyal 188607 0 3 Narendra Kumar 259815 0 4 Naveen Khanna 104483 0 5 Alok Nepaliya 108782 0 6 Saroj Vasan 274689 0 7 P.K. Gupta 424000 0 8 Sushil Kumar Jain 113386 0 9 Rajendra Kumar Dubey 342791 0 TOTAL 19,85,579 0

proceedings, the ACIT was of the view that LTC benefit under section 10(5) is

not available as foreign destination is involved i.e, the places of travel are not

situated in India, it cannot be termed as the shortest route to the designation

in India, and the National carrier is not involved/used for purposes of the air

travel. Thereafter, ACIT passed an order dated 19.02.2015 under section

201(1) read with section 201(1A) treating the entire LTC payments made to

ITA No. 145 & 146/JP/17 and S.A. No.04 & 05/JP/2017 State Bank of India, Jaipur Vs. ACIT, TDS, Jaipur employees of corporate office during financial year 2012-13 and 2013-14 as

taxable and has treated the assessee bank as an assessee in default for

purpose of section 201 and raised the following demand:

Financial Amount used Non/Short Interest Total Year outside India Deduction (Rs.) (Rs.) (Rs.) (Rs.) 2012-13 19,85,579 5,95,675 1,80,690 7,76,365

dismissed and hence, the present appeal before us.

refer to the findings of the ld CIT(A) which are under challenge before us:

“3.3 I have considered the facts of the case, the assessment order and the

submissions of the appellant. The brief facts of the case are that the AO

observed that the appellant had not deducted TDS on the amount of

reimbursement of Leave Travel Concession (LTX)/Leave Fare Concession

(LFC) given to the employees even in the cases where a foreign destination

was included in the itinerary of their journey. Section 10(5) of the Income Tax

Act, 1961 clearly stipulates that exemption under section 10(5) of the Act is

available only for travel to any place in India and restricted to the amount of

expenses actually incurred for the purpose of such travel read with conditions

as per rule 2B of the Income Tax Rule, 1962. The Assessing Officer

accordingly issued notice under section 201(1)/(201(1A) of the Act to the

ITA No. 145 & 146/JP/17 and S.A. No.04 & 05/JP/2017 State Bank of India, Jaipur Vs. ACIT, TDS, Jaipur assessee requiring to explain as to why TDS was not deducted on the amount

of reimbursement of LFC. Since the said amount cannot be treated as exempt

under section 10(5) of the Act, as a foreign destination was included in the

journey, the assessee was treated as assessee in default for not deducting

TDS on the said amount of LFC reimbursement. Interest under section

201(1A) of the Act was also charged. The appellant has contended that there

is no bar u/s 10(5) or Rule 2B on travel outside India as long as there is a

designated place of travel within India. It is contended that Rule 2B refers to

grant of exemption for travel by shortest route and envisages that a person

can travel by a circuitous route to the designated place in India. However, in

such cases the exemption u/s 10(5) is restricted to travel within India. It is

further contended that conditions of travel by economy class, air fare of the

national carrier, restriction of exemption to the amount actually incurred etc.

are also complied with. Moreover, the assessee has claimed that it was under

bonafide belief that TDS is not deductible on the impugned payments. The

assessee has also cited the interim order of Hon’ble Madras High Court dated

16-02-2015 directing the assessee not to deduct TDS on LFC payments till

final decision of Writ Petition.

3.4 I have carefully considered the arguments put forth by the appellant.

Regarding the argument of the assessee that exemption u/s 10(5) is not

limited to travel only within India and is applicable to a case involving foreign

leg in the tour, it is seen that section 10(5) read with Rule 2B is very clear in

ITA No. 145 & 146/JP/17 and S.A. No.04 & 05/JP/2017 State Bank of India, Jaipur Vs. ACIT, TDS, Jaipur intent that the said provisions are applicable in connection with proceeding on

leave to any place in India. The appellant has in fact bent the interpretation of

the said provisions in such a way which goes totally against the intent and

spirit of these provisions. In all the cases involving foreign travel, one

designated place in India is just covered for namesake, otherwise almost

entire journey is a foreign travel for all practical purposes. In these

circumstances, exemption u/s 10(5) would not be available. This view finds

support from the decision of Hon’ble ITAT, Chandigarh Bench in the case of

Sh. Om Prakash Gupta vs. ITO in ITA No.938/Chd/2011 dated 29-04-2013.

3.5 As far as the claim of bonafide belief is concerned, no doubt, the

assessee may not be aware with the ultimate plan of travel of its employees,

but at the time of settlement of LTC/LFC bills, complete facts are available

before the assessee as to where the employees have travelled, for which he

has raised a claim; meaning thereby that the assessee was aware of the fact

that its employees have travelled in foreign countries for which he is not

entitled to exemption u/s 10(5). In fact, the way the reimbursements have

been made, indicates the complicity of the assessee. For example, in the case

of Sh. Navin Khanna, who has travelled from Jaipur to Delhi to Port Blair via

Singapore and Malaysia in the month of June, 2012 and has raised a claim of

Rs.3,90,163, an amount of Rs.3,76,131 (almost equal claim in most of the

cases) has been calculated as his eligibility by taking notional to & fro air-fare

of Air India from Delhi to Port Blair at Rs.1,04,341 per head, which is much in

ITA No. 145 & 146/JP/17 and S.A. No.04 & 05/JP/2017 State Bank of India, Jaipur Vs. ACIT, TDS, Jaipur excess of actual fares as reflected in the Air India website, which shows

maximum air fare of Rs.8,840/- for the same sector for the said month. In

fact, from the claim papers of another employee, Sh. Narendra Kumar,

submitted during appellate proceedings, it is seen that the air fare shown by

him for Delhi-Portblair sector on 24-06-2012 is Rs.6,131 per head. It is thus

inferred that the notional airfare adopted by the assessee is inflated and is far

in excess of that shown for the same destinations and same month in the

website of Air India. The inescapable conclusion is that the assessee has

acted in complicity of such fraudulent claims made by its employees, which

was also widely reported in the media. The further plea of the assessee

regarding interim order of Hon’ble Madras High Court dated 16-02-2015

directing non-deduction of tax is also of no avail, since it applies to TDS

deduction after 16-02-2015 and the cases under consideration pertain to F.Y.

2012-13 and 2013-14. Thus the directions of the said court were not available

at the relevant time and the assessee was duty bound to deduct TDS on the

impugned payments. This view is supported by the decision in the case of

State Bank of India, Kanpur vs. DCIT in ITA No.138 to 140/LKW/2015 dated

04-03-2016 of ITAT, Lucknow Bench.

3.6 Respectfully following the above judgments of ITAT, Lucknow Bench

and ITAT, Chandigarh Bench, it is held that there is no exemption available

u/s 10(5) in case of travel outside India, and consequently the assessee is in

ITA No. 145 & 146/JP/17 and S.A. No.04 & 05/JP/2017 State Bank of India, Jaipur Vs. ACIT, TDS, Jaipur default for not deducting TDS on LTC/LFC payments. Ground nos. 2 to 7 are

accordingly dismissed.”

‘joint Notes’, signed by the Indian Banks’ Association [IBA] on behalf of the

member banks and the representatives of Officers’ Organizations after

industry level settlement.

7.2 Administrative and operating guidelines, issued by the Bank, are based on

the clarifications issued by the Indian Banks’ Association i.e. IBA letter

Nos.PLI/Set/25 dated 18 September 1982 and CIR/HR&R/2012-

13/665/F/6245 dated 12 July 2012.

7.3 The Bank reimburses the LTC claim made by the employees only where

the employee’s designated place is anywhere in India and he actually visits

the place as designated. In case an employee travels outside India during the

course of his visit to a place in India, reimbursement is made to him for his

entire journey by the circuitous route provided the reimbursement made to

him is limited to the actual fare/hire charges for the entire journey or the cost

of fare to his home town/designated place, by the shortest route, by the

entitled class whichever is lower. The Bank has issued Circular

No.ADM/037239 dated 20 August 1981 in this regard.

ITA No. 145 & 146/JP/17 and S.A. No.04 & 05/JP/2017 State Bank of India, Jaipur Vs. ACIT, TDS, Jaipur 7.4 An employee undertaking journey under LTC is eligible for reimbursement

of travelling expenses i.e. air/rail/steamer/road fare by the entitled class for

the permissible distance, or the actual cost of travelling for the entire journey,

whichever is lower. Further, only travel expenses are reimbursable. The Bank

has issued Circular No.CDO/P&HRD-PM/41/2013-14 dated 29 October 2013 in

this regard.For example, where there is a single itinerary for India and

overseas travel is also involved, say, Mumbai-Kolkata-Singapore-Mumbai, and

where the designated place in India is Kolkata, the economy class fare by

national carrier for journey within India (i.e. Mumbai-Kolkata and Kolkata-

Mumbai) is considered as exempt, for the purpose of section 10(5) by the

Bank, within the monetary ceiling to which the employee is eligible.

7.5. It is submitted that the Bank’s framework for provision of LTC benefit to

employees and the administrative and operating guidelines issued by the IBA

are framed taking into account the provisions of the Income-tax Act, 1961

and the Income-tax Rules, 1962.

7.6. Section 10(5) requires that the exemption is available for proceeding on

leave to any place in India. In this connection, the Bank has granted the

benefit of exemption under section 10(5) to the employees only in cases

where the designated place of travel of the employee has been a place in

India.In other words, the Bank in no case has granted the benefit of

exemption under section 10(5) to employees where the designated place of

ITA No. 145 & 146/JP/17 and S.A. No.04 & 05/JP/2017 State Bank of India, Jaipur Vs. ACIT, TDS, Jaipur travel is outside India.Similarly, the benefit is granted only when the

employee actually visits the designated place in India.

7.7. It was further submitted that Section 10(5) does not place a bar on travel

to a foreign destination during the course of travel to a place in India.

Similarly, detailed guidelines have been framed for the purpose of grant of

exemption in terms of rule 2B – these guidelines do not restrict overseas

travel while proceeding on leave to a place in India.In other words, if the

intention of the legislature or the Central Board of Direct Taxes was to not

allow exemption under section 10(5) in case a foreign leg was involved in the

journey, it would have explicitly provided so.

7.8. Rule 2B(1) of the Income-tax Rules, 1962 which deals with LTC are

reproduced below for ready reference.

“(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:-

ITA No. 145 & 146/JP/17 and S.A. No.04 & 05/JP/2017 State Bank of India, Jaipur Vs. ACIT, TDS, Jaipur (i) Where the journey is performed on or after the 1st 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 1st day of October, 1997, between such places, the amount eligible for exemption shall be:- (A) Where a recognized public transport system exists, an amount not exceeding the 1st class or deluxe class fare, 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.”

7.9. It was submitted that at various places in the rules, as highlighted above,

there is a reference to the fact that the benefit of exemption under section

10(5) is restricted to expenditure by the shortest route from the place of

origin to the destination. This clearly means that Rule 2B envisages that a

person can travel by a circuitous route to the designated place in India.In

other words, Rule 2B supports the stand that an employee can travel to

various places during the course of his travel to his ultimate destination in

ITA No. 145 & 146/JP/17 and S.A. No.04 & 05/JP/2017 State Bank of India, Jaipur Vs. ACIT, TDS, Jaipur India. As discussed earlier, there is no requirement that such places travelled

should be within India i.e. they can be outside India as well.

7.10 The annual Circular on TDS from salaries for financial year 2013-14

(CBDT Circular No.8/2013 dated 10 October 2013) clarifies that where the

journey is performed in a circuitous route, the exemption is limited to what is

admissible by the shortest route. Likewise, where the journey is performed in

a circular form touching different places, the exemption is limited to what is

admissible for the journey from the place of origin to the farthest point

reached in India, by the shortest route. This also appears to indicate that

circuitous travel involving a foreign destination is permissible.

7.11. It may be noted that 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. In other words, where the

designated place in India is Kolkata and the travel itinerary is Mumbai-

Kolkata-Singapore-Kolkata-Mumbai, exemption is granted only for travel

between Mumbai and Kolkata.In terms of the requirements of rule 2B, the

following other conditions are also satisfied:

• The exemption is granted only for travel by economy class. • The air fare of the national carrier i.e. Air India is considered for the

purpose of granting exemption.

ITA No. 145 & 146/JP/17 and S.A. No.04 & 05/JP/2017 State Bank of India, Jaipur Vs. ACIT, TDS, Jaipur • The exemption is restricted to the actual amount incurred by the

employee.

7.12 It was accordingly submitted that the Bank provides the LTC exemption

only where the employee’s designated place is in India and he actually visits

the place as designated.There is no bar under section 10(5) or rule 2B on

travel outside India if designated place is in India.Rule 2B refers to grant of

exemption for travel by the shortest route and envisages that a person can

travel by a circuitous route to the designated place in India.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.The conditions of travel by economy class, air fare of the national

carrier, restriction of exemption to the amount actually incurred, etc. are also

complied with.In other words, where the employee has designated a place of

travel in India and travels to such a place in India, the benefit of exemption

under section 10(5) cannot be denied merely on the ground that a foreign leg

is also involved.In view of the above, the Bank is of the view that it has

correctly granted exemption under section 10(5) to its employees at the time

of deduction of tax at source.

7.13In respect of findings of the ld CIT(A) that Rule 2B is very clear in intent

that that the said provisions are applicable in connection with proceeding on

leave to any place in India and the appellant has in fact bent the

ITA No. 145 & 146/JP/17 and S.A. No.04 & 05/JP/2017 State Bank of India, Jaipur Vs. ACIT, TDS, Jaipur interpretation of the said provisions in such a way which goes totally against

the intent and spirit of these provisions. In this regard, it was submitted that

had the intention of law been to disallow exemption in LTC Rules in case of

foreign travel the same should have been specifically mentioned, but that is

not so, nowhere in the entire section any such proviso/point appears. Also, it

would be wrong to say that they have bent the interpretation intentionally

against the intent and spirit of these provisions as:

1) The two basic conditions of section 10(5) read with Rule 2B are satisfied viz.

(a) On leave to any place in India; (b) the air economy fare of the national carrier by the shortest route to the place of destination;

2) The actual Bills have been submitted by employees with documentary

proofs.

3) The actual reimbursement of Bill does not exceed the Lowest air fare of

National Airlines (Air India) of two destinations by shortest route.

We would like to submit that in fact the intent of law has been misinterpreted

and the department is unduly denying the benefit of LTC to bona fide

employees who are in fact complying with the law with true spirit and intent.

7.14 It was further submitted that the payments of LTC Bills are made by the

bank after rigorous checking of Bills at three levels. The payment is made on

reimbursement basis after submission of original bills supporting and claim 16

ITA No. 145 & 146/JP/17 and S.A. No.04 & 05/JP/2017 State Bank of India, Jaipur Vs. ACIT, TDS, Jaipur forms. The bills are paid only when the Employee visits the destination points

and in none of the case the payment has been made by treating the notional

expenses on shortest route in India even though the employees did not travel

there at all. This statement of the Ld. CIT (Appeals) is totally untrue and not

based on true facts. The Bank reimburses the LTC claim made by the

employees only where the employee’s designated place is anywhere in India

and he actually visits the place as designated.

7.15. Without prejudice to the position that the Bank has correctly granted

exemption under section 10(5) to its employees at the time of deduction of

tax at source, it was further submitted that the Bank is under a bona fide

belief that even where the journey undertaken by an employee involves a

foreign leg, the employee is entitled to exemption under section 10(5) when

the employee’s designated place is in India and he actually visits the place as

designated.The Bank’s view is based on, inter alia, the following:

• The Bank’s framework for provision of LTC benefit to employees and

the administrative and operating guidelines issued by the IBA are

framed taking into account the provisions of the Income-tax Act, 1961

and the Income-tax Rules, 1962. • The provisions of LTC are governed by the industry level settlement viz.

‘joint Notes’, signed by the IBA and the representatives of Officers’

Organizations after industry level settlement.

ITA No. 145 & 146/JP/17 and S.A. No.04 & 05/JP/2017 State Bank of India, Jaipur Vs. ACIT, TDS, Jaipur • This is the normal industry practice that has been followed by all public

sector banks for several years and it has not been challenged till date. • It may be noted that in around approximately 20-25% of the cases of

LTC, a foreign leg is involved. In other words, in around 75-80% of

cases, there is no foreign leg involved. • From a legal perspective as well, as explained above, the bank is of the

view that exemption under section 10(5) cannot be denied to

employees of a foreign leg is involved as long as the designated place

of journey is in India.

7.16It was further submitted that Section 192(1) of the Income-tax Act, 1961

provides that any person responsible for paying any income chargeable as

salaries shall at the time of payment, deduct income-tax at the rates in force

on the estimated income of the assessee.The Bank had honestly and fairly

formed an opinion and arrived at the estimated income of the employees. As

discussed above, the Bank was under the bona fide belief that LTC claim for

travel within India cannot be denied just because the journey also includes

visit outside India.Accordingly, without prejudice to the position adopted by

the Bank that the Bank has correctly granted exemption under section 10(5)

to its employees at the time of deduction of tax at source, it is submitted that

in the present circumstances and facts of the case, the Bank cannot be

treated as an assessee in default in terms of section 201.

ITA No. 145 & 146/JP/17 and S.A. No.04 & 05/JP/2017 State Bank of India, Jaipur Vs. ACIT, TDS, Jaipur 7.17 There are a large number of decisions of various Courts, wherein it has

been held that where the employer makes a bona fide estimate of the income

of the employee and deducts tax at thereon, he cannot be held to be an

assessee in default under section 201.In this regard, the Bank relies on, inter

alia, the following judicial precedents:

• Gwalior Rayon Silk Co. Ltd. v. CIT (140 ITR 832) (Madhya Pradesh High Court) • CIT v. Nestle India Ltd. (243 ITR 435) (Delhi High Court) • CIT v. HCL Infor System Ltd. (282 ITR 263) (Delhi High Court) • LIC of India v. ACIT (Writ Tax No. 619 to 621 of 2009) (Allahabad High Court) • CIT v. Oil & Natural Gas Corporation Ltd. (254 ITR 121) (Gujarat High Court) • CIT v. I.T.C. Ltd. (220 Taxman 414) (Allahabad High Court) • Lintas India Ltd. v. ACIT (5 SOT 310) (Mumbai ITAT).

7.18 The Bank also places reliance on the following judicial precedents which

have upheld that where the employer has made a bona fide estimate

regarding deduction of tax at source, it cannot be regarded as an assessee in

default in terms of section 201:

• HCL Info System Ltd (95 TTJ 109) (Delhi ITAT) • Associated Cements Co. Ltd. (74 ITD 369) (Mumbai ITAT). • Mahindra & Mahindra (ITA No. 9869 to 9871/Bom/69) (Mumbai ITAT). • CIT v. Nestle India Ltd. (61 ITD 444) (Delhi ITAT) • G.D. Goenka Public School (117 ITD 101) (Delhi ITAT) • Indian Airlines Ltd. (59 ITD 353) (Mumbai ITAT). 19

ITA No. 145 & 146/JP/17 and S.A. No.04 & 05/JP/2017 State Bank of India, Jaipur Vs. ACIT, TDS, Jaipur • Eicher Goodearth Ltd. (ITA 1305/Del/1991) (Delhi ITAT). • KLM Royal Dutch Airlines (62 ITJ 268) (Delhi ITAT).

7.19 It was reiterated that it was the bona fide belief of the Bank that it was

not liable to deduct tax at source in respect of LTC provided to employees. In

other words, the Bank had deducted appropriate tax at source on the basis of

the prevalent law and there was no default on the part of the Bank in

deducting tax at source. Accordingly, the Bank cannot be held to be an

assessee in default within the meaning of section 201.

7.20. Without prejudice to the above, it was submitted that if at all the LTC

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.

7.21 Without prejudice to the above, the Bank submits that if at all the LTC

payments are to be held as taxable, the TDS liability of the bank should be

computed by applying the actual income-tax rate applicable in case of each

employee and not at a flat rate of 30% as considered by the leaned ACIT.

7.22. Without prejudice to the above, it was submitted that if at all the LTC

payments are to be held as taxable and TDS liability is to be computed, the

interest on the same should be computed on the basis of actual date of

ITA No. 145 & 146/JP/17 and S.A. No.04 & 05/JP/2017 State Bank of India, Jaipur Vs. ACIT, TDS, Jaipur payment of LTC to the employees and not for entire period of 35 months (i.e.

from 1 April 2011 to 28 February 2014) as done by the learned ACIT.

submitted that the matter is squarely covered by the decisions of the Tribunal

as referred in the ld CIT(A)’s order.

on record. The facts of the case are pari-materia with the decision of the

Coordinate Bench in case of SBI vs DCIT, TDS, Kanpur (supra) wherein

the relevant findings are as under:

“8. Having carefully examined the orders of the lower authorities in the

light of the rival submissions and the documents placed on record, we find

that as per provisions of section 10(5) of the Act, only that reimbursement

of travel concession or assistance to an employee is exempted which was

incurred for travel of the individual employee or his family members to any

place in India. Nowhere in this clause it has been stated that even if the

employee travels to foreign countries, exemption would be limited to the

expenditure incurred to the last destination in India. For the sake of

reference, we extract the provisions of section 10(5) of the Act as

under:—

ITA No. 145 & 146/JP/17 and S.A. No.04 & 05/JP/2017 State Bank of India, Jaipur Vs. ACIT, TDS, Jaipur [(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:

introduced in order to motivate the employees and also to encourage

tourism in India and, therefore, the reimbursement of LTC/LFC was

exempted, but there was no intention of the Legislature to allow the

employees to travel abroad under the garb of benefit of LTC available by

virtue of section 10(5) of the Act. Undisputedly, in the instant case the

employees of the assessee have travelled outside India in different foreign

countries and raised claim of their expenditure incurred therein. No doubt,

the assessee may not be aware with the ultimate plan of travel of its

employees, but at the time of settlement of the LTC/LFC bills, complete

facts are available before the assessee as to where the employees have

travelled, for which he has raised the claim; meaning thereby the assessee

was aware of the fact that its employees have travelled in foreign

countries, for which he is not entitled for exemption under section 10(5) of

ITA No. 145 & 146/JP/17 and S.A. No.04 & 05/JP/2017 State Bank of India, Jaipur Vs. ACIT, TDS, Jaipur the Act. Thus, the payment made to its employees is chargeable to tax

and in that situation, the assessee is under obligation to deduct TDS on

such payment, but the assessee did not do so for the reasons best known

to it. We have also carefully examined the Circular placed by the ld.

counsel for the assessee during the course of hearing, in which a

reference was made to the interim order of the Hon'ble Madras High Court

dated 16.2.2015. Through the interim order, the Hon'ble Madras High

Court has permitted the bankers not to deduct TDS on or after 16.2.2015

on the amount paid/reimbursed to the employees of the bank in respect of

LTC/HTC availed where the employee has visited a foreign city/country,

irrespective of the fact whether the LFC bills were submitted and paid

prior to 16.2.2015; meaning thereby this Circular was passed consequent

to the interim order of the Hon'ble Madras High Court. But in the present

case, the journey was undertaken in the year 2012 and the bills were

settled during that year; meaning thereby at the relevant point of time

when the bills were settled, there was no order of the Hon'ble Madras

High Court and the assessee was under obligation to deduct TDS on the

reimbursement of expenditure incurred by the assessee on foreign travel.

In the light of these facts, we are of the considered opinion that the

Revenue has rightly held the assessee to be in default, as the assessee

has not deducted TDS intentionally on the reimbursement of expenditure

incurred on LTC/LFC. Moreover, the ld. CIT(A) has directed the Assessing

ITA No. 145 & 146/JP/17 and S.A. No.04 & 05/JP/2017 State Bank of India, Jaipur Vs. ACIT, TDS, Jaipur Officer to recalculate the liability of TDS at 10%. We, therefore, find no

infirmity in the order of the ld. CIT(A) and we confirm the same.”

Gupta vs ITO (supra) also supports the case of the Revenue wherein the

Coordinate Bench has held as under:

“12. The said sub-section provides that where an individual had received

travel concession or assistance from his employer for proceeding on leave

to any place in India, both for himself and his family, then such concession

received by the employee is not taxable in the hands of the employee.

Similar exemption is allowed to an employee proceeding to any place in

India after retirement of service or after the termination of his service. The

provisions of the Act are in relation to the travel concession/assistance

given for proceeding on leave to any place in India and the said concession

is thus exempt only where the employee has utilized the travel concession

for travel within India. Further under Rule 2B of the Income Tax Rules the

condition for allowing exemption under section 10(5) of the Act are laid

down. The conditions are in respect of various modes of transport.

However, the basic condition is that the employee is to utilize the travel

concession in connection with his proceeding to leave to any place within

India, either during the course of employment or even after retirement of

service or after termination of service. Reading of section 10(5) of the Act

and Rule 2B of the Rules in conjunction lays down the guidelines for 24

ITA No. 145 & 146/JP/17 and S.A. No.04 & 05/JP/2017 State Bank of India, Jaipur Vs. ACIT, TDS, Jaipur claiming exemption in relations to the travel concession received by an

employee from his employer or former employer, for proceeding on leave

to any place in India. The person is to undertake the journey to any place

in India and thereafter return to the place of employment and is entitled to

reimbursement of expenditure on such travel between the place of

employment and destination in India. Rule 2B of the Rules further lays

down the conditions that the amount to be allowed as concession is not to

exceed the air economy fair of the National Carrier by the shortest route to

the destination in India. The said condition in no way provides that the

assessee is at liberty to claim exemption out of his total ticket package

spent on his overseas travel and part of the journey being within India. We

find no merit in the claim of the assessee in the present case and we are in

conformity with the observation of the CIT (Appeals) in this regard, which

has been reproduced by us in the paras hereinabove. In view thereof, we

reject the claim of the assessee of exemption under section 10(5) of the

Act. The ground of appeal No. 3 raised by the assessee is thus dismissed.”

We, therefore, donot see any reason to deviate from the said view taken by

the Coordinate Benches. In the result, the grounds no. 1-6 of the assessee’s

appeal are dismissed.

that flat rate of 30% applied by AO in each case for computation of TDS 25

ITA No. 145 & 146/JP/17 and S.A. No.04 & 05/JP/2017 State Bank of India, Jaipur Vs. ACIT, TDS, Jaipur liabilityis not in accordance with the provisions of section 192 and the AO has

been directed to compute TDS in case of each employee according to the tax

slab in which each employee falls. This ground is thus infructuous and is

hereby dismissed.

interest u/s 201(1A) with reference to the actual date of payment of LTC in

each case. This ground is thus infructuous and is hereby dismissed.

the assessee is dismissed.

ITA No. 146/JP/17

The facts of the case are pari-materia with the facts as noted in ITA No.

145/JP/17 and our findings contained therein shall mutatis-mutandis in this

appeal as well. In the result, the appeal of the assessee is dismissed.

S.A. No. 04 & 05/JP/2017

In terms of quantum of tax demand raised in both the years under

considerations, we direct the AO to give effect to the directions as contained

in the ld CIT(A) order, if its not done already, regarding applying the correct

rate of tax for determining the TDS liability as well as the period for which

interest is payable on such TDS liability and recompute the tax and interest

demand for both the years under consideration and serve the revised demand

ITA No. 145 & 146/JP/17 and S.A. No.04 & 05/JP/2017 State Bank of India, Jaipur Vs. ACIT, TDS, Jaipur notice to the assessee for both the years under consideration. In the interim,

no coercive steps shall be undertaken by the Department. With above

directions, the stay petitions are disposed off.

In the result the appeals filed by the assessee for the both the years are

dismissed and the stay petitions are disposed off with above directions.

Order pronounced in the open court on 28/03/2017.

Sd/- Sd/-

(KUL BHARAT) (VIKRAM SINGH YADAV) U;kf;d lnL;@Judicial Memberys[kk lnL;@Accountant Member Jaipur Dated:- 28 / 03/2017. *SANJEEV* आदेश की प्रतिलिपि अग्रेषित@ब्वचल वf जीम वतकमत वितूंतकमक जवरू

vkns'kkuqlkj@ By order,

सहायक पंजीकार@ Aेेपेजंदज. त्महपेजतंत