9911796707
TMI Blog2018 (5) TMI 599X X X X Extracts X X X X X X X X Extracts X X X X ..... cle 18(2) [hereinafter called as 'the TDS officer'] conducted the survey proceedings in the business of the appellant on 26/12/2013. During the course of such survey proceedings, the TDS officer noticed that the appellant had not deducted tax at source on LTC allowance granted by it to its employees, though the amount of allowance is not exempt u/s 10(5) of the IT Act, 1961 read with provisions of rule 2B of the IT Rules. According to the TDS officer, the amount of LTC allowance is not exempt u/s 10B as the place of destination was not within India. The submissions made by the appellant are that the employees who intend to avail LTC submits the claim in the prescribed Form declaring designated place of visit which is within India. However, the employee may undertake the tour to place outside India, for exemple employee may travel from Bangalore to Wagha Border viz., Frankfrut. The reimbursement made by the appellant includes the travel cost towards both Indian and foreign travel. The appellant considered the travel as within India and no tax was deducted at source on such allowance. However, the TDS officer was of the opinion that since the place of destination was not within Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es 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 Income-tax Act only when all the conditions are followed. The conditions are as follows: - There must be a reimbursement of - Actual expenditure incurred on - Travelled within India by taking a - Shortest route [Refer: Pages 4 & 5 of A.O.'s order] The above explanation dispels the assessee's argument. (ii) the CIT(A) erred in holding that the travel should be within India: The assessee Bank itself vide its letter dt: 26/3/2014 had stated as under: (i) ** ** ** (ii) In our case, we have reimbursed the LFC only in respect of journey the destination of which is in India. Further, the quantum was restricted to the air fare by economy c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Tax. 7.4 The Hon'ble ITAT, Lucknow Bench 'A' in the case of SBI case (supra) 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: "9. On perusal of this section, we are of the view that this 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 the Legislature to allow the employees to travel abroad under the garb of benefit of LTC available by virtue of section 10(5) of the Act. Undisputedly, in the instant case, the employees of the assessee have travelled outside India in different foreign countries and raised claim of their expenditure incurred therein. No doubt, the assessee may not be aware with the ultimate plan of travel of its employees, but at the time of settlement of the LTC/LFC bills, complete facts are available before the assessee as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 assessee of exemption u/s. 10(5) of the Act........." 7.6 In the case of HCL Info systems Ltd. (supra) - relied on by the assessee-Bank - the issue was that the A.O. had rejected the claim of the assessee (HCL) of treating LTC allowance as exempt u/s. 10(5) for the reason of not verifying the evidence with regard to incurring of actual expenditure. However, the Tribunal had accepted the argument of the assessee that the CBDT Circulars did not specifically require verification of the evidence and, thus, held that there was sufficient material on record - by way of declarations furnished by the employees concerned - for the assessee to form a bona-fide belief that LTA granted to its employees was exempt u/s. 10(5) of the Act. On an appeal, the Hon'ble Delhi High Court concurre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of 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 from the employees etc. It was only on the strength of such demonstration that the explanation being honest, fair and having a bona fide belief, the Tribunal accepted the assessee's contention which has been sustained by the Hon'ble High Court. However, in the present case, the assessee-Bank had not made any honest effort to justify how its bona fide belief was formed to exclude such allowance from salary of the employee was exempt u/s. 10(5) of the Act. This case law relied by the assessee-Bank is distinguishable. 7.10 We have with due respects perused the ruling of the Hon'ble Supreme Court in the case of Larsen and Toubro Ltd. (supra) - relied on by the assessee-Bank - wherein the issue before the Hon'ble Court was that ' ..... X X X X Extracts X X X X X X X X Extracts X X X X
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