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TMI Blog2019 (1) TMI 145X X X X Extracts X X X X X X X X Extracts X X X X ..... xamination. As fairly submitted by the assessee bank, while calculating the estimated tax liability of its employees, it always consider LFC claim as exempt under section 10(5) and the same position, being followed and accepted consistently in the past years, was followed in the current financial year as well. However, for the first time, after the survey by the tax department, this issue arose for consideration and after the judgment of the Tribunal, the matter got clarified and the assessee bank has duly complied and deposited the outstanding demand along with interest and has taken corrective steps in subsequent years as well. There was reasonable cause in terms of section 273B of the Act for not deducting tax by the assessee Bank. In the result, the penalty so levied under section 271C is hereby directed to be deleted. - Decided in favour of assessee. - ITA. No. 1135/JP/2018 - - - Dated:- 31-12-2018 - SHRI VIJAY PAL RAO, JM AND SHRI VIKRAM SINGH YADAV, AM For The Assessee : Smt. Neelam Ashok (C.A.) For The Revenue : Shri J.C. Kulhari (JCIT) ORDER PER: VIKRAM SINGH YADAV, A.M. This is an appeal filed by the assessee against the order of ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28.03.2017). 4.1 The ld. AR submitted that without prejudice to the position that the Bank has correctly granted exemption under section 10(5) to its employees at the time of deduction of tax at source, it is submitted that the Bank was under a bona fide belief that even where the journey undertaken by an employee involves a foreign leg, the employee is entitled to exemption under section 10(5) when the employee's designated place is in India and he actually visits the place as designated. 4.2 The ld. AR further submitted that the Bank had honestly and fairly formed an opinion and arrived at the estimated income of the employees. The Bank was under the bona fide belief that LTC claim for travel cannot be denied just because the journey also includes visit outside India. The bank was under a genuine and bonafide belief that it was not under any obligation to deduct tax at source on LTC payments. While calculating the tax liability of Employees, the figure of LTC was always exempted and this rule was being followed since many years. TDS Exemption of LFC was in a nature of thumb rule and should be considered as a reasonable cause for non deduction of TDS. It was only after t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s further submitted that at the same time, Section 273B of the IT Act provides that in case the payer proves to the Revenue department that there was some reasonable cause for the failure to deduct tax, then the penalty under section 271C is waived off. The provisions of Section 273B which provides that penalty not to be imposed in certain cases read as under: 273B. Notwithstanding anything contained in the provisions of clause (b) of sub-section (1) of section 271, section 271A, section 271AA, section 271B, section 271BA, section 271BB, section 271C, section 271CA, section 271D, section 271E, section 271F, section 271FA, section 271FB, section 271G, section 271H, clause (c) or clause (d) of sub-section (1) or sub-section (2) of section 272A, sub-section (1) of section 272AA or section 272B or sub-section (1) of section 272BB or clause (b) of sub-section (1) or clause (b) or clause (c) of sub-section (2) of section 273, no penalty shall be impossible on the person or the assessee, as the case may be, for any failure referred to in the said provisions if he proves that there was reasonable cause for the said failure. 4.7 There is no definition of the term reasonable cause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .I.T. (TDS, Chandigarh), the Chandigarh Bench of the Tribunal made the following observation with regard to reasonable cause for failure to deposit TDS:- It is well settled law that the penalty need not to be imposed in each and every case and discretionary in nature and the facts and circumstances of the case shall have to be taken into consideration. Section 273B of the Income Tax Act provides that no penalty under section 271C shall be imposable on the person or the assessee as the case may be, for any failure referred to in the said provisions, if he proves that there was reasonable cause for the said failure. The circumstances explained by the learned counsel for the assessee clearly reveal that the assessee paid interest to non-banking financial institution and did not deduct tax because the assessee was under the bonafide belief that no TDS was to be deducted on the payments made to non-banking financial institution. The Assessing Officer made disallowance under section 40(a)(ia) of the Income Tax Act and other additions were also made in the assessment order, which are accepted by the assessee and the demand raised as per assessment order has been paid. Therefore, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unts. However, at the time of final settlement of the claims of the employees, the assessee bank should have obtained all the relevant details such as the places of visits (destinations) etc. When the assessee bank was aware of the fact that its employees had visited foreign countries by availing LFC concession, 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 192 of the Act, it is a clear case of levy of penalty under section 271C of the Act. He further submitted that the Tribunal has already confirmed the order of the AO passed under section 201(1) 201(IA) of the Act holding the assessee bank to be in default for not deducting tax on the LFC claims of its employees. He further relied on the findings of the lower authorities which we have discussed above. 6. We have heard the rival contentions and perused the material available on record. Undisputedly, the Coordinate Bench has confirmed the order of the ACIT(TDS) passed under section 201(1) 201(IA) of the Act holding the assessee bank to be in default for not deducting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, the employer i.e., the assessee bank is required to take the same into consideration while estimating his salary income. The question for consideration is what is the obligation cast on the assessee bank while considering such LFC which is claimed by the assessee as exempt under section 10(5) of the Act. In other words, whether the assessee bank should take such self-declaration on face value or it should do some reasonable verification and due-diligence before allowing such claim while estimating the salary income. 9. In this regard, we refer to CBDT Circular No. 05/2011 [F.NO. 275/192/2011-IT(B)], dated 16-8-2011 which contains instructions for income tax deduction under section 192 from Salaries during the financial year 2011-12 which interalia provides as under: 5.2 Incomes not included under the Head Salaries (Exemptions) Any income falling within any of the following clauses shall not be included in computing the income from salaries for the purpose of Section 192 of the Act :- ( 1) The value of any travel concession or assistance received by or due to an employee from his employer or former employer for himself and his family, in connection with h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee bank has allowed exemption to all its employees who have submitted LFC claim. The Revenue has not disputed the LFC claim in respect of these employees except in respect of 12 employees. These 12 employees, who have travelled to foreign countries as part of their travel itinerary with designated place of travel in India, and in respect of which they have submitted their LFC claim, has been disputed by the Revenue as not eligible for exemption under section 10(5) in respect of amount reimbursed towards foreign leg of their travel. The explanation of the assessee bank is that while calculating the tax liability of its employees, the figure of LFC was always exempted and this rule was being followed since many years, being in a nature of thumb rule and TDS exemption of LFC was thus allowed almost mechanically year after year. To our mind, it is important to be consistent but at the same time, one needs to be mindful of what been submitted by the employees towards their LFC claims. It appears that the assessee bank has looked at these 12 employees s claim broadly, as in other cases, in terms of actual travel being undertaken, the designated place being in India and the amou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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