2023 (8) TMI 38 - AT - Income Tax

Exemption u/s 10(5) denied - 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 - HELD THAT - On respectful perusal of the judgment of the Hon'ble Supreme Court 2022 (11) TMI 426 - SUPREME COURT 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 as held 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. 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 assessee 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. Decided against assessee.

Summary

Issues Involved:
1. Legality of the CIT(A)'s order.
2. Denial of exemption under Section 10(5) for Leave Travel Concession (LTC) involving foreign travel.
3. Treatment of the bank as an "assessee in default" for non-deduction of TDS.
4. Requirement to produce Form No. 26A for LTC claims.
5. Levy of interest under Section 201(1A) of the Income Tax Act.

Summary:

1. Legality of the CIT(A)'s Order:
The assessee challenged the CIT(A)'s order dated 19.05.2017 for AY 2014-15, stating it was contrary to the law and facts of the case.

2. Denial of Exemption Under Section 10(5) for LTC Involving Foreign Travel:
The CIT(A) confirmed the denial of exemption under Section 10(5) for LTC claims involving foreign travel. The Supreme Court had previously ruled against the assessee for AY 2012-13, holding that LTC exemption cannot be claimed for travel outside India. The Tribunal followed this precedent, noting that the provisions under Section 10(5) and Rule 2B mandate that LTC should be for travel within India only.

3. Treatment of the Bank as an "Assessee in Default" for Non-Deduction of TDS:
The CIT(A) treated the bank as an "assessee in default" for not deducting TDS on LTC reimbursements involving foreign travel. The Tribunal upheld this view, referencing the Supreme Court's decision that the employer has a statutory duty under Section 192(1) to deduct tax at source from salaries, including LTC claims that do not comply with Section 10(5).

4. Requirement to Produce Form No. 26A for LTC Claims:
The CIT(A) directed the appellant to produce Form No. 26A to the AO to include such LTC claims by employees in their return of income. The Tribunal noted that the AO could collect evidence from the income tax department, but upheld the CIT(A)'s direction as consistent with legal requirements.

5. Levy of Interest Under Section 201(1A) of the Income Tax Act:
The CIT(A) confirmed the AO's action to levy interest under Section 201(1A) for the assessee's failure to deduct TDS. The Tribunal found no reason to interfere with this decision, aligning with the Supreme Court's ruling that the employer's failure to deduct tax was not a bona fide mistake.

Conclusion:
The Tribunal dismissed the appeal, following the Supreme Court's judgment in the assessee's own case for AY 2013-14, which had settled the issues against the assessee and in favor of the revenue. The order was pronounced in the open court on 28/07/2023.