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2018 (5) TMI 599 - AT - Income TaxShort deduction u/s. 192 - assessee in default u/s. 201(1) - allowing exemption u/s. 10(5) towards the reimbursement of LTC/LFC claims of its employees - Held that - In the present case the employees of the assessee-Bank have travelled outside India and raised claims of their expenditure incurred therein. There is no dispute that the assessee-Bank may not be aware with the plan of travel of its employees initially, however, at the time of settlement of LTC/LFC bills, the employees should have placed comprehensive details before the assessee-Bank as to where they have travelled/visited and raised the claims, that means to say, the assessee-Bank was well aware of the fact that its employees have travelled in foreign countries too by availing LTC/LFC for which they were not entitled for exemption u/s. 10(5). Such being the scenario, the assessee-Bank cannot now plead that it was under the bonafide belief that the amounts claimed were exempt u/s. 10(5). Thus, the Assessing Officer(TDS) was within her domain to term/charge that the assessee- Bank was under obligation to deduct TDS on such payments. Since the assessee-Bank had failed to do so, the A.O.(TDS) had rightly treated the assessee an assessee in default u/s. 201(1) of the Act. The assessee had relied on various case laws for the proposition that its estimate is bona fide and it cannot be held to be an assessee in default u/s. 201(1) of the Act. This contention of the assessee is without legal basis, since the assessee had made no effort to prove how its belief was formed that such foreign travel expenses would come within the ambit of sec. 10(5). Respectfully following the ratio of the decision in the case of Syndicate Bank (2017 (4) TMI 533 - ITAT BANGALORE), we dismiss the appeals filed by the assessee.
Issues Involved:
1. Non-deduction of tax at source on Leave Travel Concession (LTC) allowance. 2. Determination of the assessee-bank as 'assessee in default' under section 201(1) of the Income Tax Act. 3. Application of section 10(5) of the Income Tax Act and Rule 2B of the Income Tax Rules. 4. Bona fide belief of the assessee-bank regarding the exemption of LTC allowance. Issue-wise Detailed Analysis: 1. Non-deduction of tax at source on Leave Travel Concession (LTC) allowance: The TDS officer conducted survey proceedings and discovered that the appellant (assessee-bank) did not deduct tax at source on LTC allowances granted to employees, despite the allowances not being exempt under section 10(5) of the Income Tax Act, 1961, and Rule 2B of the Income Tax Rules. The LTC allowance was not exempt because the destination was outside India. The appellant argued that employees declared a designated place within India, but the reimbursement included travel costs for both Indian and foreign travel, which the appellant considered as travel within India, thus no tax was deducted. 2. Determination of the assessee-bank as 'assessee in default' under section 201(1) of the Income Tax Act: The TDS officer held the appellant as 'assessee in default' for not deducting tax at source on the LTC allowance and passed an order under section 201(1) demanding tax along with interest under section 201(1A). The CIT(A) confirmed this action, and the Tribunal upheld the decision, referencing similar cases like Syndicate Bank vs. Asst. CIT(TDS) and SBI vs. Dy. CIT(TDS), where the banks were also treated as 'assessees in default' for similar reasons. 3. Application of section 10(5) of the Income Tax Act and Rule 2B of the Income Tax Rules: The Tribunal reiterated that under section 10(5) and Rule 2B, LTC reimbursement is exempt only if the travel is within India and follows the shortest route. The appellant's employees traveled to foreign countries, thus not meeting the conditions for exemption. The Tribunal emphasized that the appellant should have verified the travel details at the time of final settlement of claims and deducted tax accordingly, as the exemption under section 10(5) is only for travel within India. 4. Bona fide belief of the assessee-bank regarding the exemption of LTC allowance: The appellant claimed it was under the bona fide belief that the LTC allowance was exempt under section 10(5). However, the Tribunal found that the appellant did not apply the provisions of section 10(5) correctly and allowed exemptions mechanically. The Tribunal noted that the appellant did not provide credible material to justify its belief that the allowance was exempt. The Tribunal referenced several cases, including HCL Info systems Ltd. and Nestle India Ltd., to highlight that a bona fide belief must be based on honest and fair assessment, which was not demonstrated by the appellant. Conclusion: The Tribunal dismissed the appeals filed by the assessee-bank, upholding the decisions of the lower authorities. The Tribunal concluded that the appellant failed to justify its belief that the LTC allowance was exempt under section 10(5) and was rightly treated as 'assessee in default' for not deducting tax at source. The Tribunal emphasized the importance of adhering to the conditions specified under section 10(5) and Rule 2B for claiming exemptions on LTC reimbursements.
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