STATE BANK OF INDIA LAKE TOWN BRANCH,KOLKATA vs. INCOME TAX OFFICER TDS CIRCLE 3(1), KOLKATA

This appeal filed by the assessee pertaining to the Assessment Year (in short „AY‟) 2016-17is directed against the order passed u/s 250 of the Income Tax Act, 1961 (in short the „Act‟) by the Learned Commissioner of Income Tax (Appeals), Addl/JCIT(A)-1, Coimbatore (in short „the Ld. CIT(A)‟], dated 21.03.2024 arising out of Order dated 31.03.2023, passed under Section 201(1)/201(1A) of the Act.

Brief facts of the case are that the information was received from TDS Circle 2(2), Mumbai, regarding LFC payment made by the assessee to its employees during financial year 2015-16 (relevant to the AY 2016-17) without deducting tax at source as required u/s 192(1) of the Act. A show cause notice u/s 201(1)(1A) of the Act was issued to the assessee on 23.03.2023 asking the assessee to explain why it should not be treated as the assessee in default for failure to TDS on the Leave Fair Concession (LFC). In response the assessee provided a list of such employees who availed to LFC benefit but argued that the LFC payment did not attract TDS liability u/s 192(1) of the Act, as these payments were exempt u/s 10(5) of the Act after verifying the details provided by the assessee, the AO concluded that no TDS was deducted on LFC payments involving certain travel routs, which were not eligible for exemption u/s 10(5) of the Act. As a result, the AO treated the assessee as being in default u/s 201(1) and calculated the tax liability to be Rs. 87,212/- along with interest u/s 201(1A) amounting to Rs. 81,107/- thereby raising the total demand of Rs. 1,68,320/- the assessee‟s appeal to CIT(A) was dismissed leading to the present appeal before this Tribunal. 2 State Bank of India,Lake Town Branch 4. At the time of hearing, the Ld. Counsel for the assessee submitted that the assessee was not given adequate time to comply with the AO notice dated 28.03.2023 and the order was passed hastily on 31.03.2023 without giving assessee an opportunity to furnish necessary details. The assessee further argued that at the time making the LFC payments it relied on the judgment of the Hon‟ble Madras High Court dated 16.02.2015 which held that the TDS was not applicable on LFC payments was acted in good faith assuming that TDS was not applicable on LFC payments. The assessee acted in good faith assuming that no TDS was required. The Counsel also referred to the Hon‟ble Supreme Court interim order dated 28.03.2023 in which the Hon‟ble Court stay the operation of previous judgment dated 08.06.2023, which was in favour of the revenue and directed that no recovery should be made from the employees until final decision was reached. Therefore, the assessee requested that issue is restored to the file of AO for reconsideration.

On the other hand, the Ld. DR argued that the assessee was provided sufficient opportunity to comply with the TDS but failed to deduct tax at source on the LFC payments. The AO therefore, correctly raised the demand u/s 201(1) and 201(1A) of the Act. The ld. DR also contended that the Hon‟ble Supreme Court had already decided the appeal in favour of the Revenue in its order dated 08.06.2023 and the assessee failure to deduct TDS was a clearly violation of the provision of the Act.

We after hearing the rival submissions of the parties and perusing the material available on record, we find that the assessee was held to be in default for non deduction of tax on LFC payments. The Hon‟ble Madras High Court in judgment dated 16.12.2015 followed that the TDS was not required on LFC payment which made have created confusion for the State Bank of India,Lake Town Branch assessee regarding its TDS obligation. Subsequently, the Hon‟ble Supreme Court vide its order dated 08.06.2023 ruled in favour of the Revenue, but later stayed the operation of this judgment on 28.08.2023.

Given the stay order by the Hon‟ble Supreme Court considering the facts that the assessee did not have adequate opportunity to presentits case before the AO. We deem it appropriate to restore the matter to the file of the AO for necessary approval. The AO is directed to examine whether the employees who received LFC payment offered the amounts for their taxation in their individual return, if it is found that employees have already paid tax on this account no further liability for TDS should arose on the assessee. In the interest of justice and fair play, we set aside the order of Ld. CIT(A) and restore the matter to the file of AO for fresh examination. The AO is directed to verify the details and provide a reasonable opportunity of being heard to the assessee before deciding the issue in accordance with law.

In terms of the above, appeal of the assessee is allowed for statistical purposes.

In the result, appeal of the assessee isallowed for statistical purposes. Kolkata, the 9th October, 2024.