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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 ..... /s. 201 of the Act without bringing on record that the employees have not paid their taxes. 3. As the issues raised in these appeals pertaining to the same assessee and also interlinked, for the sake of convenience, they were heard, considered and disposed off in this consolidated order. 4. Briefly stated, the facts of the case are as follows:- The assessee-Bank is a nationalized bank. A survey u/s. 133A of the Act was conducted in the business premises of the assessee on 18.03.2014 by the Asst. Commissioner of Income-tax(TDS) - the A.O. - to verify the TDS compliance by the assessee in the case of salary and perquisite payments made to its employees. It was the stand of the A.O. that the assessee-Bank had erroneously allowed LFC exemption u/s. 10(5) of the Act to its employees since the travels also included a leg outside India and travel by long circuitous route which was not in accordance with the provisions of s. 10(5) of the Act read with Rule 2B of I.T. Rules. After due consideration of the assessee's explanation and also extensively analyzing the provisions of (i) Rule 2B of Income-tax Rules, 1962; (ii) s.10(5) of the Act and following the decision of the Hon'ble ITAT, C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he has raised the claim; meaning thereby the deductor was aware of the fact that its employees have travelled in foreign countries, for which he was not entitled for exemption u/s. 10(5) of the Act. Recently, the Hon'ble ITAT, Lucknow Bench 'A' in the case of State Bank of India vs. DCIT(TDS), Kanpur (IT Appeal Nos. 138 to 140 (Luck) of 2015). On similar facts has held that the A.O. has rightly held the assessee to be in default, as the assessee has not deducted TDS intentionally on the reimbursement of expenditure incurred on LTC/LFC. Thus, the payment made to its employees was chargeable to tax and in that situation, the deductor was under obligation to deduct TDS on such payment, but, the deductor did not do so..... 6.3 Ground No. 4: The appellant has taken the ground that the Assessing Officer erred in confirming the demand u/s. 201 of the Act without bringing on record that the employees have not paid the tax and that the Assessing Officer failed to appreciate the fact that the appellant as an employer has only to make a fair estimate of the salary income for making deductions u/s. 192. Again, it is mentioned that it is a survey case wherein the Department found that the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... factual position and legal precedents, I am of the view that the A.O. has rightly held the deductor to be assessee in default, as the deductor has not deducted TDS intentionally on the reimbursement of expenditure incurred on LTC/LFC since the claim of the employee does not fall under the provisions of section 10(5) of the Income-tax Act, 1961. So the provision of sections 201 and 201(1A) of the Income-tax Act will be attracted......." 5.1 In essence, the CIT(A) had confirmed the demand raised by the A.O. u/s. 201 and 201(1A) of the Act for all the assessment years under consideration. 6. Aggrieved, the assessee-Bank has come up before us with the present appeals. During the course of hearing, the submissions made by the ld. Counsel for the assessee are summarized as under: -That the eligibility to claim exemption for LFC is given in s. 10(5) of the Act and the amount of exemption is given in Rule 2B of the Income-tax Rules. The rule also has laid down the conditions regarding various modes of transport. In order to appreciate the amount that will be exempted as LFC in the hands of the employee, it was essential to read the section and the relevant rule together. The section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that since the employees of the assessee-Bank had travelled to foreign countries, the benefit of exemption available u/s. 10(5) of the Act cannot be extended. It was argued that at the time of advancement of LTC amount, the employer may not have been aware of it, but, at the time of settlement of bills of LTC/LFC, complete details were obtained by the employer and were available on record. Once it was noticed that the employee had visited foreign countries and he was not entitled for exemption of reimbursement of LTC u/s. 10(5) of the Act, it was contended by the learned DR, the employer (assessee-Bank) ought to have deducted tax at source treating the amount as not exempt and as being part of the employee's total salary. It was therefore, submitted that since the assessee Bank had intentionally not deducted tax at source on a payment to which the employee was not entitled for any exemption, the A.O.(TDS) had rightly held that the assessee-Bank to be in default and raised the demands u/s. 201(1) and 201(1A) of the Act. 6.2.1 In support of his argument, the learned DR had placed strong reliance on the following case laws, namely: (i) SBI v. DCIT (TDS), Kanpur (67 Txmann.com 81); ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers under dispute. During the course of hearing before us, the learned Counsel had made certain arguments which are dealt with as under: (i) that there was no requirement under the law or the rules that the journey should be performed through shortest route: Rule 2B of Income-tax Rules, 1962 says Conditions for the purpose of section 10(5) 2B........................................................................................................................ ......................................................................................................................... (i) where the journey is performed on or after the 1st day of October, 1997, by air, an amount not exceeding the air economy fare of the national carrier by the shortest route to the place of destination; ..................................................................................................................... As per the provisions of section 10(5) of the Income-tax Act & Rule 2B of Income-tax Rules, the reimbursement of LTC is exempt u/s. 10(5) of Incometax Act only when all the conditions are followed. The conditions are as follows: -There must be a reimbursement o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r exemption of reimbursement of LTC u/s. 10(5) of the Act, the assessee-Bank was under obligation to deduct tax at source treating such an amount as not exempt. Since the assessee-Bank had failed to enforce its duty to deduct tax at source as envisaged in section s.192 of the Act,, it is tantamount that the assessee-Bank was an 'assessee in default' u/s. 201(1) of the Act and the A.O.(TDS) was within her domain to hold so. Moreover, the assessee-Bank does not have a case that its employees have included the LTC/LFC in their taxable salary and paid tax on the same. Moreover, the national carrier, i.e., Air India/Indian Airlines had also been offering LTC package to various destinations in India and allowing passengers to visit the foreign countries at the full fare chargeable to the final destination in India and it was clearly mentioned in Air India website that the value of LTC was chargeable to Income Taxe. the nati 7.4 The Hon'ble ITAT, Lucknow Bench 'A' in the case of SBI v.DCIT(TDS) reported in 67 Taxmann.com 81 on identical facts had decided the issue in favour of Revenue. For appreciation of facts, the relevant portion of the findings of the Hon'ble Bench is as follows: " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceeding to leave to any place within India, either during the course of employment or even after retirement of service or after termination of service. Reading of section 10(5) of the Act and Rule 2B of the rules in conjunction lays down the guidelines for claiming exemption in relation to the travel concession received by an employee from his employer or former employer, for proceeding on leave to any place in India and thereafter return to the place of employer and is entitled to reimbursement of expenditure on such travel between the place of employment and destination in India. Rule 2B of the Rules further lays down the conditions that the amount to be allowed as concession is not to exceed the air economy fare of the National Carrier by the shortest route to the destination in India. The said condition in no way provides that the assessee is at liberty to claim exemption out of his total ticket package spent on his overseas travel and part of the journey being within India. We find no merit in the claim of the assessee in the present case and we are in conformity with the observation of the CIT(Appeals) in this regard............ In view thereof, we reject the claim of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to its employees under the garb of CA in order to avoid taxation and, accordingly, held the assessee as an 'assessee in default'. When the issue went in appeal before the Tribunal which held that the assessee was under a bona fide belief that CA was not taxable and, hence, neither order u/s. 201 nor interest u/s. 201(1A) was leviable. The stand of the Tribunal was concurred by the Hon'ble High Court. However, in the present case, the assessee-Bank had failed to cite the pronouncement of any order of the judiciary to demonstrate why and how it formed the belief that such concession on a circuitous route was exempt u/s. 10(5) of the Act. Thus, we are of the view that this case law relied on by the assessee-Bank cannot be of any help to it. 7.9 In the case of CIT v.ITC Ltd. (supra) - relied on by the assessee-Bank - the issue involved was non-deduction of tax at source from the conveyance allowance (CA) paid to its employees. The Hon'ble Tribunal allowed the assessee's case after accepting the explanation of the assessee to be bona-fide, i.e., the assessee had amply demonstrated that belief was based on a meeting with the representatives of the assessee-company, declarations obtained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore 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) 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. 9. 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. Taking into account all the facts and circumstances o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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