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TMI Blog2021 (2) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... le, the very foundation of impugned demands raised under section 201 r.w.s 192 ceases to hold good in law. We must, therefore, vacate these demands. Bearing in mind entirety of the case, we cancel the impugned demands under section 201 r.w.s. 192 as unsustainable in law. - ITA No. 1717/Mum/2019 - - - Dated:- 27-1-2021 - Pramod Kumar (Vice President), And Saktijit Dey (Judicial Member) For the Appellant : None For the Respondent : TS Khalsa ORDER PER PRAMOD KUMAR, VP: 1. This appeal calls into question the correctness of the order dated 11th December 2018 passed by the learned CIT(A), in the matter of tax withholding demands raised on the assessee under section 201 r.w.s 192 of the Income Tax Act, 1961, for the assessment year 2012-13. 2. Grievances raised by the assessee are as follows: 1. Order under section 201(1) and 201(1A) barred by limitation. 1.1. The learned CIT(A) erred in not holding that the order under section 201(1) and 201(1A) is barred by limitation and hence, void-ab-initio. 1.2. The learned CIT(A) erred in holding that provisions of section 201(3), as amended by Finance Act, 2014, are retrospective in nature and ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal is without prejudice to the other. 5. The appellant reserves the right to amend, alter or add to the grounds of appeal. 3. To adjudicate on this appeal and for the reasons we will set out in a short while, only a very few material facts need to be taken note of. The assessee before us is a branch office of a public sector bank, hereinafter referred to as 'the assessee employer'. On 7th January 2014, this branch office was subjected to survey proceedings under section 133A. During the course of this survey, it was found that certain employees have claimed LFC (i.e., Leave Travel Concession) facility, wherein travel to places outside India was involved . It was noted that some of the employees, in these LFC claims, have taken a very circuitous route, involving travel abroad to one or more domestic destinations. It was in this backdrop that the matter was examined further by the Assessing Officer. He noted that the admissible leave travel concession in these cases was treated as tax-exempt under section 10(5), and estimated tax liability was computed without taking into account the admissible leave concession facility in such cases. The Assessing Officer was, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actual fare / hire charges for the entire journey or the cost of fare to his home town /designated place, by the shortest route, by the entitled class whichever is lower. The bank has issued Circular No. ADM/037239 dated 20 August 1981 in this regard. 13. An employee undertaking journey under LTC is eligible for reimbursement of travelling expenses i.e. air / rail / steamer / road fare by the entitled class for the permissible distance, or the actual cost of travelling for the entire journey, whichever is lower. Further, only travel expenses are reimbursable and other facilities, if any, provided by travel agents are not reimbursable. The Bank has issued Circular No. CDO/P HRD-PM/41/2013-14 dated 29 October 2013 in this regard. 14. For example, where there is a single itinerary for India and overseas travel is also involved, say, Mumbai-Kolkata-Singapore-Mumbai, and where the designated place in India is Kolkata, the economy class fare by national carrier for journey within India (i.e. Mumbai-Kolkata and Kolkata-Mumbai) is considered as exempt, for the purpose of section 10(5) by the Bank, within the monetary ceiling to which the employee is eligible. 15. It is submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion; (ii) where places of origin of journey and destination are connected by rail and the journey is performed on or after the 1st day of October, 1997, by any mode of transport other than by air, an amount not exceeding the air-conditioned first class rail fare by the shortest route to the place of destination; and (iii) where the places of origin of journey and destination or part thereof are not connected by rail and the journey is performed on or after the 1st day of October, 1997, between such places, the amount eligible for exemption shall be:- (A) where a recognised public transport system exists, an amount not exceeding the 1st class or deluxe class fare, as the case may be, on I such transport by the shortest route to the place of destination; and (B) where no recognised public transport system exists, an amount equivalent to the air-conditioned first class rail fare, for the distance of the journey by the shortest route, as if the journey had\ been performed by rail 22. At various places in the rules, as highlighted above, there is a reference to the fact1 that the benefit of exemption under section 10(5) is restricted to expenditure by j the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtest route and envisages that a person can travel by a circuitous route to the designated place in India. Even in cases where the employee travels outside India during the course of his travel to a place in India, the exemption under section 10(5) is restricted for travel within India The conditions of travel by economy class, air fare of the national carrier, restriction of exemption to the amount actually incurred, etc. are also complied with. 28. In other words, where the employee has designated a place of travel in India and travels to such a place in India, the benefit of exemption under section 10(5) cannot be denied merely on the ground that a foreign leg is also involved. 29. In view of the above, the Bank is of the view that it has correctly granted exemption under section 10(5) to its employees at the time of deduction of tax at source. BONA FIDE BELIEF 30. Without prejudice to the position that the branch 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 branch is under a bona fide belief that even where the journey undertaken by an employee involve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n default under section 201. 36. In this regard, the Bank relies on, inter alia, the following judicial precedents: Gwalior Rayon Silk Co. Ltd. v. CIT (140 ITR 832) (Madhya Pradesh High Court) CIT v. Nestle India Ltd. (243 ITR 435) (Delhi High Court) CIT v. HCL Info System Ltd. (282 ITR 263) (Delhi High Court) LIC of India v. ACIT (Writ Tax No. 619 to 621 of 2009) (Allahabad High Court) CIT v. Oil Natural Gas Corporation Ltd. (254 ITR 121) (Gujarat High Court) CIT v. I.T.C. Ltd. (220 Taxman 414) (Allahabad High Court) Lintas India Ltd. v. ACIT (5 SOT 310) (Mumbai ITAT) 37. The Bank also places reliance on the following judicial precedents which have upheld that where the employer has made a bona fide estimate regarding deduction of tax at source, it cannot be regarded as an assessee in default in terms of section 201: HCL Info System Ltd (95 TTJ 109) (Delhi ITAT) Associated Cements Co. Ltd. (74ITD 369) (Mumbai ITAT). Mahindra Mahindra (ITA No. 9869 to 9871 /Bom/69) (Mumbai ITAT). CIT v. Nestle India Ltd. (61 ITD 444) (Delhi ITAT) G.D. Goenka Public School (117 ITD 101) (Delhi ITAT) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it will cover the entire gamut of issues:- 9. We have heard the rival submissions and perused the material available on record. The facts of the case are pari-materia with the decision of the Coordinate Bench in case of SBI vs ACIT, TDS, Kanpur (supra) wherein the relevant findings at as under: 8. Having carefully examined the orders of the lower authorities In the light of the rival submissions and the documents placed on record, we 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 anyplace 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. For the sake of reference, extract the provisions of section 10(5) of the Act as under- 10. In computing the total income of a previous year of any person, any income failing within any of the following clauses shall not be included- ITA No. 145 146/JP/17 and S.A. No.04 05/JP/2017 State Bank of India, Jai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the amount paid/reimbursed to the employees of the bank in respect of LTC/HTC availed where the employee has visited a foreign city/country, irrespective of the fact whether the LFC bills were submitted and paid prior to 16.2.2015; meaning thereby this Circular was passed consequent to the interim order of the Hon'ble Madras High Court. But in the present case, the journey was undertaken in the year 2012 and the bills were settled during that year; meaning thereby at the relevant point of time when the bills were settled, there was no order of the Hon'ble Madras High Court and the assessee was under obligation to deduct TDS on the reimbursement of expenditure incurred by the assessee on foreign travel. In the light of these facts, we are of the considered opinion that the Revenue has rightly held the assesses to be in default, as the assesses has not deducted IDS intentionally on the reimbursement of expenditure incurred on LTC/LFC. Moreover, the Id. CIT(A) has directed the Assessing IT A No. 145 146/JP/17 and S.A. No. 04 05/JP/2017 State Bank of India, Jaipur Vs. ACIT, TDS, Jaipur Officer to recalculate the liability of TDS at 10%. We, therefore, find no infirmity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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, which has been reproduced by us in the paras hereinabove. In view thereof, we reject the claim of the assessee of exemption under section 10(5) of the Act. The ground of appeal No. 3 raised by the assessee is thus dismissed. 11. No contrary authority has been brought to the notice of the Bench. We, therefore, do not see any reason to deviate from the said view taken by the Coordinate Benches. In the result, the grounds no. 1-6 of the assessee's appeal are dismissed. 10. Regarding ground no. 7, it is noted that the Id CIT(A) has already held that flat rate of 30% applied by AO in each case for computation of TDS ITA No. 145 146/JP/17 and S.A. No.04 05/JP/2017 State Bank of India, Jaipur Vs. ACIT, TDS, Jaipur liability is not in accordance with the provisions of section 792 and the AO has been directed to compute TDS in case of each employee according to the tax slab in which each employee falls. This ground is thus infructuous and is hereby dismissed. 11. Regarding ground no. 8, the Id CIT(A) has already ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... satisfy the obligation that LTC/FTC is not taxable in view of section 10(5), the employer is not only required to be satisfied about the ingredients of the said clause but also to keep and preserved evidence fn support thereof. The relevant provisions on this issue are section 10(5) read with Rule 2B on which the above rulings have been based. Further the Circular No. 8/2012 [F.NO. 275/192/2012-IT(B)], dated 5-10-2012 of CBDT which is a guidance Note for calculating INCOME-TAX DEDUCTION FROM SALARIES UNDER SECTION 192 is also relevant for giving this claim. After considering the entire material and respectfully following the above three judgments of ITAT, Lucknow Bench, /ITAT- Jaipur Bench and ITAT Chandigarh Bench, it is held that there is no exemption available u/s 10(5) in case of travel outside India, and consequently the appellant's petition is dismissed on this issue. In the light of above legal and factual details the amount of ₹ 3,09,576/- paid to the employees by the bank(where the journey has been taken outside India) is to be considered as the amount for which the bank is to be treated as deemed defaulter as per provisions of section 201(1). Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oyer has properly discharged his duties under section 192, all that is to be seen is whether the employer has reasonably, or bonafide, estimated the income of the employees and deducted tax in respect of such estimated income. As long as the conduct of the employer in this exercise is bonafide, he cannot be said to be wanting in his conduct under section 192. Explaining this legal position, in the oft-quoted landmark judgment in the case of CIT Vs Gwalior Rayon Silk Mills Ltd [(1983) 140 ITR 832 (MP)], Hon'ble Madhya Pradesh High Court judgment has, inter alia, observed that, A duty is cast on an employer to form an opinion about the tax liability of his employee in respect of the salary income. While forming this opinion, the employer is undoubtedly expected to act honestly and fairly. But if it is found that the estimate made by the employer is incorrect, this fact alone, without anything more, would not inevitably lead to the inference that the employer has not acted honestly and fairly. Unless that inference can be reasonably raised against an employer, no fault can be found with him. It cannot be held that he has not deducted tax on the estimated income of the emp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avel subject to the following conditions, namely:- (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; (ii) where places of origin of journey and destination are connected by rail and the journey is performed on or after the 1st day of October, 1997, by any mode of transport other than by air, an amount not exceeding the air-conditioned first class rail fare by the shortest route to the place of destination; and (iii) where the places of origin of journey and destination or part thereof are not connected by rail and the journey is performed on or after the 1st day of October, 1997, between such places, the amount eligible for exemption shall be:- (A) where a recognised public transport system exists, an amount not exceeding the 1st class or deluxe class fare, as the case may be, on such transport by the shortest route to the place of destination; and (B) where no recognised public transport system exists, an amount equivalent to the air-conditioned first class rail fare, for the distance of the journey by the shortes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... volving a sector of overseas travel, and, in the absence of such a bar, the assessee employer cannot be faulted for not inferring such a bar. The reimbursement is restricted to airfare, on the national carrier, by the shortest route- as is the mandate of rule 2B. The employee has actually travelled, as a part of that composite itinerary involving a foreign sector as well, to the destination in India. The guidance available to the assessee employer indicates that, in such a situation, the exemption under section 10(5) is available to the employee- though to the extent of farthest Indian destination by the shortest route, and that is what the assessee employer has allowed. In the light of this analysis of the legal position and the factual backdrop, whatever may be the position with respect of taxability of such a leave travel concession in the hands of the employee, the assessee employer cannot be faulted for not deducting tax at source from the leave travel concession facility allowed by him to the employees. As we hold so, we may add that we have not really addressed ourselves to the larger question with respect to the actual taxability of this leave travel concession in the ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verted. There is no reason to doubt the same and prolong the proceedings. In case the Assessing Officer finds that this relief is based on incorrect facts, its open to him to seek appropriate remedy by, inter alia, seeking a recall of this order, but, on our own and merely to double-check, we are not inclined to remit the matter to the file of the Assessing Officer. Inconvenience to the assessee and smallness of the amounts involved apart, this is a case of a public sector undertaking, and any unnecessary further prolonging of the proceedings can only at the cost of taxpayers' hard-earned monies. We must avoid that. The second point we must make is that we are alive to the fact that on materially identical facts, the coordinate benches have decided the matter against the assessee by holding that exemption under section 10(5) is not available to the employees on the facts of these cases. That does not, however, affect our conclusions, which are essentially based on our interpretation about the impact of section 192(1) so far as obligations of the assessee employer are concerned, and, in none of the cases cited before us, any findings are given about the malafides, or even lac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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