2024 (2) TMI 1397 - AT - Income Tax

TDS u/s 192 on the LTC paid to employees - reimbursement of Leave Travel concession involving foreign leg through circuitous route - assessee in default for non-deduction of tax at source - HELD THAT - As perused the order of the Hon'ble Madras High Court 2015 (2) TMI 1378 - MADRAS HIGH COURT referred by the ld. AR 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, the Hon'ble Supreme Court in the case of the assessee in 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, respectfully following the decision of the Hon'ble Supreme Court, we hold that the assessee is in default within the meaning of section 201(1)(1A) 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). Appeals of the assessee are dismissed.

Summary

Issues Involved:
1. Whether the assessee is liable to deduct tax at source on the Leave Travel Concession (LTC) payments made to its employees.
2. Whether the assessee can be treated as "assessee in default" for non-deduction of tax at source.
3. The applicability of interest under Section 201(1A) for non-deduction of tax at source.

Detailed Analysis:

1. Liability to Deduct Tax at Source on LTC Payments:
The primary issue was whether the appellant (assessee) was in default for not deducting tax at source while releasing LTC payments to its employees. The Hon'ble Supreme Court in the case of SBI Vs. ACIT determined that LTC payments are exempt from income tax only if the travel is strictly within India and follows the shortest route. The Court found that the employees in question had included foreign travel in their itineraries, thereby violating the statutory provisions under Section 10(5) of the Income Tax Act, 1961, and Rule 2B of the Income Tax Rules, 1962. Consequently, the Court held that the assessee ought to have deducted tax at source on these payments.

2. Assessee in Default:
The Revenue's position, supported by the Hon'ble Supreme Court, was that the assessee-employer failed to fulfill its statutory duty under Section 192(1) of the Income Tax Act, which mandates the deduction of tax at source from salary payments. The Court emphasized that the employer cannot claim ignorance of the travel plans of its employees, as the details are available during the settlement of LTC bills. Therefore, the assessee was rightly held as "assessee in default" under Section 201 for not deducting tax at source.

3. Applicability of Interest under Section 201(1A):
The assessee also contested the interest charged under Section 201(1A) for non-deduction of tax. The Court upheld the imposition of interest, reiterating that the employer's statutory duty to deduct tax at source was clear and unambiguous. The failure to do so warranted the charging of interest as per the provisions of the Income Tax Act.

Conclusion:
The appeals filed by the assessee were dismissed. The Tribunal upheld the findings of the Hon'ble Supreme Court and the Delhi High Court, affirming that the assessee was liable to deduct tax at source on LTC payments involving foreign travel. The decision also confirmed that the assessee was correctly treated as "assessee in default" and the interest charged under Section 201(1A) was justified. The interim order by the Hon'ble Madras High Court was deemed irrelevant in light of the Supreme Court's ruling.