STATE BANK OF INDIA,NEW DELHI vs. ACIT, CIRCLE-77(1), NEW DELHI

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “G”: NEW DELHI BEFORE Shri C.M. Garg, Judicial Member AND Dr. B. R. R. Kumar, Accountant Member ITA No. 5386/Del/2017 (Assessment Year: 2014-15) State Bank of India, Vs. ACIT, Office Administration Circle-77(1), Department, 4th Floor, Local New Delhi head Office, 11-Sansad Marg, New Delhi (Appellant) (Respondent) PAN:AAACS8577K Assessee by : Shri Vivek Gupta, CA Revenue by: Shri. H. K. Choudhary, CIT DR Date of Hearing 05/07/2023 Date of pronouncement 28/07/2023

O R D E R PER C. M. GARG, J. M.: 1. This appeal has been filed by the assessee against the order of the ld CIT(A)-41, New Delhi dated 19.05.2017 for AY 2014-15. 2. The assessee has raised the following grounds of appeal:- “1. That order of Ld CIT(A), on aspects agitated in this appeal, is bad in law being contrary to the provisions of the law and without appreciation of the facts and circumstances of the case in their right perspective. 2. That on the facts and circumstances of the case & provisions of the law, the Ld CIT(A) erred in confirming the denial of exemption u/s 10(5) in respect of reimbursement of Leave Travel concession Involving foreign leg through circuitous route as long as the employees designated place is in India for his leave travel concession and he actually visits the place as designated. 3. Without prejudice to ground no 2 above, the Ld CIT (A) has also erred in treating the bank as an "assessee in default" by considering the bona fide belief of the bank as mala fide for alleged non deduction of TDS on reimbursement towards Leave Travel Concession.

ITA No. 5386/Del/2017 State Bank of India, 4. Without prejudice to ground no 3 above, the Ld CIT(A) has erred in directing to produce the form no 26A to the Ld AO by the appellant for inclusion of such LTC claim by employees in their return of income when the Ld AO can himself collect evidences from its own income tax department as the appellant had already given the name, addresses and PAN of such employees during the course of assessment proceedings which the Ld AO has also recorded in his assessment order. 5. That in light of aforesaid grounds of appeals, the Ld CIT (A) also erred in confirming the action of AO to levy interest under section 201(1A) of IT Act.” 3. The assessee’s representative (ld AR) in all fairness submitted that since the issue has been decided against the assessee for AY 2012-13 by Hon'ble Supreme Court in assessee’s own case in Civil Appeal No. 8181/2022, therefore, the appeal may kindly be disposed off in accordance with the said order of Apex Court. 4. The ld CIT DR submitted that the issue has been finally settled by Hon'ble Supreme Court against the assessee in favour of the department and the same order may kindly be followed in present AY 2014-15. 5. On respectful perusal of the judgment of the Hon'ble Supreme Court dated 04.11.2022 in assessee’s own case in Civil Appeal (supra) we find that the identical issue under identical facts and circumstances for AY 2013-14 has been decided in favour of the revenue and against assessee with following observations and findings:- “6. Let us first go through some of the relevant provisions of the Income Tax Act, 1961 (for short „the Act‟) and the Income Tax Rules, 1962 framed therein. Let us first take Section 192(1) of the Act which casts a statutory duty on the employer to deduct Tax at source from the salary of its employee “192(1) Any person responsible for paying any income chargeable under the head “Salaries” shall, at the time of payment, deduct income-tax on the amount payable at the average rate of income- tax computed on the basis of the rates in force for the financial year in which the payment is made, on the estimated income of the assessee under this head for that financial year.” The consequences of failure to deduct tax at source when it is due, is given in Section 201, which reads as follows:- “Consequences of failure to deduct or pay.

ITA No. 5386/Del/2017 State Bank of India, 201. (1) Where any person, including the principal officer of a company,— (a) who is required to deduct any sum in accordance with the provisions of this Act; or (b) referred to in sub-section (1A) of section 192, being an employer, does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required by or under this Act, then, such person, shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of such tax: Provided that any person, including the principal officer of a company, who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a payee or on the sum credited to the account of a payee shall not be deemed to be an assessee in default in respect of such tax if such payee- (i) has furnished his return of income under section 139; (ii) has taken into account such sum for computing income in such return of income; and (iii) has paid the tax due on the income declared by him in such return of income, and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed Provided further that no penalty shall be charged under section 221 from such person, unless the Assessing Officer is satisfied that such person, without good and sufficient reasons, has failed to deduct and pay such tax. Section 10(5) which exempts payments received as LTC with which we are presently concerned. It reads as under :- “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 — XXX XXX XXX (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,

ITA No. 5386/Del/2017 State Bank of India, 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: [Explanation 1].—For the purposes of this clause, "family", in relation to an individual, means—

(i) the spouse and children of the individual ; and (ii) the parents, brothers and sisters of the individual or any of them, wholly or mainly dependent on the individual.” The above provision has to be read along with Rule 2B of Income Tax Rules. Rule 2B reads as under :- “[Conditions for the purpose of section 10(5) . 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 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,

ITA No. 5386/Del/2017 State Bank of India, between such places, the amount eligible for exemption shall be :— (A) where a recognised 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. The appellant before us is a Public Sector Bank, namely, State Bank of India (SBI). The Revenue has held the appellant to be an “assessee in default”, for not deducting the tax at source of its employees. 8. These proceedings started with a Spot Verification under Section 133A when it was discerned by the Revenue that some of the employees of the assessee- employer had claimed LTC even for their travel to places outside India. These employees, even though, raised a claim of their travel expenses between two points within India but between the two points they had also travelled to a foreign country as well, thus taking a circuitous route for their destination which involved a foreign place. The matter was hence examined by the Assessing Officer who was of the opinion that the amount of money received by an employee as LTC is exempted under Section 10(5) of the Act, however, this exemption cannot be claimed by an employee for travel outside India which has been done in this case and therefore the assessee- employer defaulted in not deducting tax at source from this amount claimed by its employees as LTC. There were two violations of the LTC Rules, pointed out by the Assessing Officer: A. The employee did not travel only to a domestic destination but to a foreign country as well and B. The employees had admittedly not taken the shortest possible route between the two destinations thus the Applicant was held to be an assessee in default by the Assessing Officer. The travel undertaken by the employees as LTC was hence in violation of Section 10(5) of the Act read with Rule 2B of the Income Tax Rules, 1962, both of which have been reproduced above. The order of the Assessing Officer was challenged before CIT (A), which was dismissed and so was their appeal before the Income Tax Appellate Tribunal. 9. The Delhi High Court vide its order dated 13.01.2020 dismissed the appeal holding that there was no substantial question of law in the Appeal. It was held that the amount received by the employees of the assessee employer towards their LTC claims is not liable for the exemption as these employees had visited foreign countries which is not permissible under the law.

ITA No. 5386/Del/2017 State Bank of India, 10. The provisions of law discussed above prescribe that the air fare between the two points, within India will be given and the LTC which will be given will be of the shortest route between these two places, which have to be within India. A conjoint reading of the provisions discussed herein with the facts of this case cannot sustain the argument of the appellant that the travel of its employees was within India and no payments were made for any foreign leg involved. 11. We do not want to get into the role of the travel agencies and the present dynamics of air fare, but it is difficult for us to accept that a person will avail foreign tour without paying any price for it. We leave it at that. 12. It can be seen from the records that many of the employees of the appellants had undertaken travel to Port Blair via Malaysia, Singapore or Port Blair via Bangkok, Malaysia or Rameswaram via Mauritius or Madurai via Dubai, Thailand and Port Blair via Europe etc. It is very difficult to appreciate as to how the appellant who is the assessee- employer could have failed to take into account this aspect. This was the elephant in the room. 13. The contention of the Appellant that there is no specific bar under Section 10(5) for a foreign travel and therefore a foreign journey can be availed as long as the starting and destination points remain within India is also without merits. LTC is for travel within India, from one place in India to another place in India. There should be no ambiguity on this. 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

ITA No. 5386/Del/2017 State Bank of India, 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 bonafide 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 bonafide 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.” 6. Respectfully following the judgment of the Hon'ble Supreme Court in assessee’s own appeal for AY 2013-14 (supra) grounds of assessee are dismissed. 7. In the result, appeal of the assessee is dismissed. Order pronounced in the open court on 28/07/2023.

-Sd/- -Sd/- (B. R. R. Kumar) (C. M. GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated:28/07/2023 A K Keot Copy forwarded to 1. Applicant 2. Respondent 3. CIT Page | 7

ITA No. 5386/Del/2017 State Bank of India, 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi