2020 (1) TMI 628 - HC - Income Tax

TDS on Leave Travel Concession - assessee in default - HELD THAT - The employees of the appellant had undertaken journeys to the designated places in India via foreign countries. The instances of such travel are tabulated in the tabulation placed on record which shows that travel was undertaken to Port Blair via Malaysia, Singapore, Port Blair via Bangkok, Malaysia, Rameswaram via Mauritius, Madurai via Dubai, Thailand, Port Blair via Europe etc. Obviously, such journeys did not qualify towards LTC claim, since under the LTC scheme, the journeys have to be undertaken within India and by the shortest route. The amounts received by the employees of the appellant-assessee towards reimbursement of LTC claims are therefore not liable to exemption and, consequently, the appellant is liable to deduct tax at source in respect of payments made by it to its employees. Since the appellant had not deducted tax on the entire amount paid and deducted tax only in respect of part of the amount paid as per its own understanding, the finding that the appellant was an assessee in default, in our view, is completely justified. Tribunal was also correct in its view that it was the primary obligation of the appellant being the deductor, to establish that the recipients had disclosed the amounts received by them towards LTC claims as part of their taxable income and paid tax thereon. The appellant has been afforded the opportunity to make good their claims premised upon the proviso to Section 201(1) - No substantial question of law

Summary

Issues:
1. Exemption application - delay condonation.
2. Appeal by State Bank of India against ITAT order on LTC claims and TDS deduction.

Exemption Application - Delay Condonation:
The court allowed the exemption application subject to all just exceptions, and the application was disposed of. Another application sought condonation of a 30-day delay in re-filing, which was condoned, leading to the disposal of the application.

State Bank of India Appeal - LTC Claims and TDS Deduction:
The appeal was filed by State Bank of India against the ITAT order dated 09.07.2019 concerning the Assessment Year 2013-14. The Tribunal rejected the bank's primary submission that it was not liable to deduct tax at source for payments made to employees for LTC claims outside the scheme parameters. The Tribunal also dismissed the bank's argument that providing PAN details of employees should absolve them from TDS liability. The Tribunal remanded the issue to the AO for re-adjudication after hearing the assessee.

The bank claimed to have deducted tax at source for LTC claims not falling within the scheme, such as foreign travel destinations like Port Blair via Malaysia, Singapore, etc. However, the court found that such journeys did not qualify for LTC claims, as they must be within India and by the shortest route. Consequently, the bank was held liable to deduct tax at source for these payments. The court upheld the Tribunal's decision that the bank, as the deductor, had the obligation to ensure tax compliance by employees receiving LTC reimbursements.

The court concluded that no substantial question of law arose for consideration and dismissed the appeal filed by State Bank of India.

This detailed analysis of the judgment covers the issues of exemption application delay condonation and the appeal by State Bank of India regarding LTC claims and TDS deduction comprehensively.