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2024 (7) TMI 215 - AT - Income TaxTDS u/s 192 - non deduction of TDS on the LTC reimbursement towards foreign travel by the employees of assessee - HELD THAT - If employees of the assessee travel within India and receive any value for any travel concession or assistance along with his family, is exempt from tax. Therefore there is no requirement of TDS on such value/assistance received from employer. However, in this case, we observe that employees of assessee have travelled outside India which is not exempt income in the hands of the assessee s employees. Therefore this value or assistance should be considered for TDS u/s. 192 of the Act. Similar issue has been decided by the coordinate Bench of the Tribunal in State Bank of India, Personal Banking Branch, New Delhi Ors 2024 (2) TMI 1397 - ITAT DELHI relying on 2022 (11) TMI 426 - SUPREME COURT held in holding that the assessee is liable to deduct tax at source on the payments made to its employees towards LTC bills - Decided against assessee.
Issues Involved:
1. Exemption under Section 10(5) of the Income Tax Act for Leave Travel Concession (LTC) involving foreign travel. 2. Obligation of the employer to deduct Tax at Source (TDS) under Section 192 of the Income Tax Act. 3. Applicability and interpretation of the Supreme Court and High Court judgments on LTC and TDS obligations. Detailed Analysis: 1. Exemption under Section 10(5) of the Income Tax Act for Leave Travel Concession (LTC) involving foreign travel: The primary issue in this case revolves around whether the Leave Travel Concession (LTC) provided for travel involving a foreign leg qualifies for exemption under Section 10(5) of the Income Tax Act. The Supreme Court in the case of State Bank of India v. ACIT (C.A. No.8181 of 2022) clarified that LTC is intended for travel within India, from one place in India to another place in India. The Court emphasized that the moment employees undertake travel with a foreign leg, it is not considered travel within India and thus not covered under the provisions of Section 10(5). The Court further noted that foreign travel frustrates the basic purpose of LTC, which is to familiarize a civil servant or a government employee with Indian culture by traveling within the country. 2. Obligation of the employer to deduct Tax at Source (TDS) under Section 192 of the Income Tax Act: The judgment also addressed the employer's obligation to deduct TDS under Section 192 of the Act. It was observed that the State Bank of India (SBI) failed to deduct tax at source on LTC payments involving foreign travel, which is not exempt under Section 10(5). The Court held that the employer cannot plead ignorance about the travel plans of its employees, as during the settlement of LTC bills, all relevant travel details are available. Therefore, it was the employer's statutory duty to deduct tax at source, and failure to do so rendered the employer an "assessee in default" under Section 201(1) of the Act. 3. Applicability and interpretation of the Supreme Court and High Court judgments on LTC and TDS obligations: The case also involved interpreting various judgments from the Supreme Court and High Courts regarding LTC and TDS obligations. The Supreme Court's decision in SBI v. ACIT was pivotal, affirming that LTC involving foreign travel does not qualify for exemption under Section 10(5) and that the employer must deduct TDS on such payments. The Madras High Court's interim order in WP No.11991/2014, which stayed the operation of SBI's circular withdrawing LTC for foreign travel, was also considered. However, the Supreme Court's judgment overruled this interim order, establishing that the employer must deduct TDS on LTC payments involving foreign travel. Conclusion: The ITAT Bangalore, following the Supreme Court's judgment, upheld the Assessing Officer's decision that the employer (SBI) was in default for not deducting TDS on LTC payments involving foreign travel. The Tribunal dismissed the appeal, reiterating that LTC is for travel within India and that the employer's failure to deduct tax at source on LTC payments involving foreign travel was not a bona fide mistake. The Tribunal's decision aligns with the Supreme Court's interpretation of Section 10(5) and Section 192 of the Income Tax Act.
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