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2024 (2) TMI 919 - AT - Income TaxBank liability to deduct TDS in respect of the LTC/LFC bills - assessee in default u/s 201(1)(1A) for non-deduction of tax under Section 192 - HELD THAT - We have perused the order of the Hon'ble Madras High Court 2015 (2) TMI 1378 - MADRAS HIGH COURT and observed that a writ petition was filed challenging the circular issued by the SBI to the effect that officers/employees would not be entitled to visit Overseas Countries/Centers as part of LTC /HTC. In the interim order passed by the Hon'ble Madras High Court, it has been held that any amount paid to the petitioner towards LTC/reimbursement of LTC pursuant to the impugned order would not amount to income so as to enable the bank to deduct tax at source. We further observed that the Hon'ble Madras High Court in its interim order held that if the writ petition is dismissed, the employees are liable to pay tax on the amount paid by the bank. However, recently, the Hon'ble Supreme Court in the case of the assessee STATE BANK OF INDIA VERSUS ASSISTANT COMMISSIONER OF INCOME TAX 2022 (11) TMI 426 - SUPREME COURT affirmed the order of the Hon'ble Delhi High Court in holding that the assessee is liable to deduct tax at source on the payments made to its employees towards LTC bills. In view of the decision of the Hon'ble Supreme Court, the interim stay granted by the Hon'ble Madras High Court is of no help to the assessee bank. Thus we hold that the assessee is in default within the meaning of section 201(1)(1A) of the Act for non-deduction of tax under Section 192 of the Act on the reimbursement of LTC (Leave Travel Concession) /LFC (Leave Fare Concession) and HTC (Home Travel Concession).
Issues Involved:
1. Verification of Form 26A by the Assessing Officer (AO). 2. Applicability of the first proviso to section 201(1) of the Income Tax Act. 3. Treatment of the deductor as an assessee in default. 4. Confirmation of the AO's order treating the assessee as in default under section 201(1) and levying interest under section 201(1A). Summary: Issue 1: Verification of Form 26A by AO The Revenue questioned whether the CIT(A) was justified in setting aside the verification part to the AO after upholding the AO's finding in principle, especially when the assessee had never filed Form 26A before the CIT(A). The Tribunal noted that the CIT(A) directed the AO to provide the opportunity to the appellant to produce the calculation of tax deduction and charge the tax rate accordingly. Issue 2: Applicability of First Proviso to Section 201(1) The CIT(A) observed that the benefit of the proviso to section 201(1) is not available to the assessee as the deductor had never filed Form 26A before the AO or CIT(A). However, the CIT(A) allowed the assessee to claim the benefit of the proviso on production of Form 26A before the AO as per law. Issue 3: Treatment of Deductor as Assessee in Default The CIT(A) held that the responsibility to deduct tax is distinct from the liability of the deductee to pay tax on such income. The CIT(A) rejected the argument that it amounts to double recovery of tax but allowed the benefit of proviso to section 201 if the deductees included such LTC amounts in their Income Tax Return. Issue 4: Confirmation of AO's Order The Tribunal found no infirmity in the CIT(A)'s observations and rejected the grounds raised by the Revenue, thus upholding that the assessee is not liable to deduct TDS on LTC/LFC bills. Appeals of the Assessee: The assessee raised common grounds across multiple assessment years questioning the AO's and CIT(A)'s orders, particularly the denial of exemption under section 10(5) for LTC involving a foreign leg. The Tribunal observed that the Hon'ble Supreme Court in SBI Vs. ACIT held that the assessee ought to have deducted tax at source on LTC payments, reinforcing that foreign travel is not covered under section 10(5). Interim Stay by Madras High Court: The Tribunal noted the interim stay by the Madras High Court, which held that any amount paid towards LTC would not amount to income for TDS purposes. However, the Supreme Court's decision in SBI Vs. ACIT overruled this, affirming the liability of the assessee to deduct tax at source on LTC payments. Conclusion: The Tribunal dismissed the appeal of the Revenue and the appeals of the assessee, holding the assessee in default for non-deduction of tax on LTC/LFC/HTC reimbursements, following the Supreme Court's decision.
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