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TMI Blog2017 (4) TMI 533X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) of the Act. Such being the scenario, the assessee-Bank cannot now plead that it was under the bona-fide belief that the amounts claimed were exempt u/s. 10(5) of the Act. 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) of the I.T. Act. - Decided against assessee. - I.T.A. Nos.1398 to 1403/Bang/2016, I.T.A. Nos.1435 to 1477/Bang/2016 - - - Dated:- 6- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount as calculated in the respective impugned orders passed u/s. 201(1) and 201(1A) of the Act. 5. Aggrieved, the assessee-Bank took up the issues for all the assessment years under dispute before the CIT(A) for consideration. After due consideration of the assessee s contentions, the A.O. s reasoning as elaborately discussed in impugned orders under dispute, the CIT(A) confirmed the A.O. s stand for all the AYs under consideration for almost identical reasons. For appreciation of facts, the relevant portions of the CIT(A) s reasoning are as under: (at pg. 10 of CIT(A) order for AY 2011-12 (I.T.A. No.550/TDS/CIT(A)13/14-15) 6.2. I find that as per provisions of section 10(5) of the Act, only that reimbursement of travel concession or assistance to an employee is exempted which was incurred for travel of the individual employee or his family members to any place in India. Nowhere in this clause, it has been stated that even if the employee travels to foreign countries, exemption would be limited to the expenditure incurred to the last destination in India. The appellant has relied on the decision of the Hon ble Supreme Court in the case of CIT vs. Larsen Toubro Ltd. (2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred by them towards the travel. The quotation includes both Indian travel and foreign travel. However, the employer considers overall expenditure (i.e., both Indian and foreign) as notional expenditure incurred towards travel from Bangalore to farthest place in India/destination placed declared by employee (may be Wagha border or Debrugarh etc.) Thus, notional expenses reimbursed by employer are much higher than the actual expenditure incurred by employee for his places of visit in India. Though the bills of actual expenditure incurred by employee for travel within India is available on records, same is not taken into consideration by employer. Instead, employer calculates separately by considering national carrier prices to the destination placed declared by the employee. These notional prices are calculated based on the price list given by travel agent and these prices are higher in rates comparative to the normal bookings. The amount calculated by the employer is reimbursed to the employee. Here, the amount claimed and the reimbursement amount used to be the same or minor difference i.e., difference in few thousands only. The employer reimbursed amount is over and above the act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rier to that destination as laid down in Rule 2B. In view of this, it was apparent that the assessee-Bank had not defaulted in complying with the TDS provisions of the Act; -That the CIT(A) failed to appreciate the fact that there was no requirement under the law or the rules that the journey should be performed through shortest route. -That the CIT(A) erred in holding that the travel should be within India; -That the CIT(A) erred in confirming the demand u/s. 201 of the Act without bringing on record that the employees have not paid the taxes; -That the CIT(A) failed to appreciate the fact that the assessee-Bank need not establish the eligibility of the employees to claim deduction u/s. 10(5) of the Act; -That the CIT(A) failed to appreciate the fact that the assessee-Bank was under bona-fide belief that the LTC was exempt in the hands of the employees ; -That the CIT(A) failed to appreciate the fact that the assessee-Bank was under the bona-fide belief that the amount was exempt u/s. 10(5) and as such, the assessee- Bank cannot be treated as an assessee in default u/s. 201 of the Act. 6.1.1 In conclusion, it was submitted that in view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h allowance from salary of the employee. Neither had it adduced any evidence to support its claim that it acted in a bona-fide manner nor was that there any basis for forming the belief that such allowance exempt u/s. 10(5) of the Act. 6.4 In conclusion, the learned DR summed up that the provisions of s.10(5) of the Act provide that reimbursement of travel concession or assistance to an employee was exempt which was incurred for travel of the individual employee or his family members to any place in India. Nowhere in this clause, has it been stated that even if the employee travels to foreign countries, exemption would be limited to the expenditure incurred to the last destination in India. It was, therefore, pleaded that the stand of the authorities below requires to be sustained. 7. We have carefully considered the rival submissions, perused the relevant materials on record and also the case laws relied on by either party. 7.1 The solitary issue for consideration now is: Whether the A.O. was justified in treating the assessee-Bank as an assessee in default u/s. 201(1) of the Act for making short deduction u/s. 192 of the Act in allowing exemption u/s. 10(5) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, the quantum was restricted to the air fare by economy class through the shortest route .. [Courtesy: P 6 of A.O. s order] 7.3 The above narrations are highlighting the contradictions of the assessee s defense. The assessee-Bank had in its grounds of appeal contended that 4.5 ..that the appellant bank was under the bona-fide belief that the amount was exempt u/s. 10(5) and as such, the appellant bank cannot be treated as an assessee in default u/s. 201 of the Income-tax Act, 1961 . On the contrary, on examination of the case on hand, it is explicit that the assessee bank had not applied its mind while applying the provisions of s.10(5) of the Act with letter and spirit and allowed exemption in a mechanical way. As rightly highlighted by the learned DR in his submissions, the provisions of s. 10(5) of the Act are clear and only the reimbursement of expenses which were incurred on travel of employees and his family to any place in India subject to certain conditions are exempt. Since the employees of the assessee-Bank had travelled to foreign countries, the benefit of exemption available u/s. 10(5) of the Act should not have been granted. We agree that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... LFC bills, complete facts are available before the assessee as to where the employees have travelled, for which, he has raised the claim; meaning thereby the assessee was aware of the fact that its employees have travelled in foreign countries, for which, he is not entitled for exemption u/s. 10(5) of the Act. Thus, the payment made to its employees is chargeable to tax and in that situation, the assessee is under obligation to deduct TDS on such payment, but the assessee did not do so for the reasons best known to it. 7.5 On identical facts, the Hon ble ITAT, Chandigarh A Bench in the case of Sh Om Parkash Gupta v. ITO in I.T.A. No.938/Chd/2011 dated 29.4.2013, had recorded its findings as under: 12. The said sub-section provides that where an individual had received travel concession or assistance from his employer for proceeding on leave to any place in India, both for himself and his family, then such concession received by the employee is not taxable in the hands of the employee. Similar exemption is allowed to an employee proceeding to any place in India after retirement of service or after the termination of his service. The provisions of the Act are in relation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s was exempt u/s. 10(5) of the Act. On an appeal, the Hon ble Delhi High Court concurred the findings of the Tribunal by holding that the bona-fides of the assessee was accepted by the first appellate authority and were duly confirmed by the Appellate Tribunal. 7.7 On a careful perusal of the ruling of the Hon ble Court (supra), we are of the view that the said ruling of the Hon ble Court is distinguishable so far as the issue under dispute is concerned. The present assessee-Bank had not brought any credible material on record to remotely suggest that that the basis [by way of declarations furnished by the employees concerned] for formation of such a bonafide belief and honest opinion on exemption u/s. 10(5) of the Act of such an allowance on a circuitous route when it was evident that the employees had undertaken foreign travel. 7.8 In the case of CIT v. Nestle India Ltd. (supra) relied on by the assessee- Bank the issue, in brief, was that on a perusal of the annual return of the assessee, the ACIT(TDS) noticed that the assessee had made short deduction of TDS while computing the income of its employees chargeable under the head salaries , the conveyance allowance (C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein the issue before the Hon ble Court was that the employer is not under any statutory obligation under the Income-tax Act, 1961 or the rules to collect evidence to show that the employee had actually utilized the amount paid towards LTC or conveyance allowance u/s. 10(5). However, the present issue is: Whether the deductor (assessee-Bank) was right in allowing exemption u/s. 10(5) to its employees for travel outside India and travel by a long circuitous route which was, according to the A.O., not in accordance with the provisions of s.10(5) read with Rule 2B? Thus, the issue before the Hon ble Court (supra) was on a different footing and has no relevance whatsoever to the matter under consideration. The ruling of the Hon ble Supreme Court relied on by the assessee-Bank, in our considered view, cannot come to its rescue. 8. As rightly highlighted by the Hon ble Tribunal, Lucknow Bench (supra) and careful perusal of the provisions of s.10(5) of the Act, we are of the view that the said provision was introduced in order to motivate the employees and also to encourage tourism in India and, therefore, the reimbursement of LTC/LFC was exempted, but, there was no intention of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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