2021 (10) TMI 1054 - AT - Income Tax

Tribunal rules in favor of assessee, orders under sections 201(1) & 201(1A) void. Invalid demands for travel tax.

The Tribunal ruled in favor of the assessee, holding that the orders under section 201(1) and 201(1A) were barred by limitation and void-ab-initio. The ... Tax withholding under section 192 - Leave travel concession exemption under section 10(5) and Rule 2B - Bona fide estimate of taxable salary by employer - Liability as assessee in default and deletion of demand under section 201(1) and 201(1A)Tax withholding under section 192 - Leave travel concession exemption under section 10(5) and Rule 2B - Bona fide estimate of taxable salary by employer - Liability as assessee in default and deletion of demand under section 201(1) and 201(1A) - Whether demands raised under section 201(1) and 201(1A) for non-deduction of tax on leave fare concession (LFC) paid by the employer in assessment years 2010-11 and 2011-12 are sustainable. - HELD THAT: - The Tribunal followed a coordinate-bench decision in the assessee's own case and examined the distinction between the employer's obligation to deduct tax on the estimated income of employees under section 192 and the actual taxability of payments in the hands of employees under the head 'income from salaries'. Applying section 10(5) read with Rule 2B, the Tribunal observed that Rule 2B limits the amount exemptible (by reference to air/rail fares by the shortest route) but does not prohibit a journey that includes a foreign sector; the employer reasonably allowed exemption to the extent of the fare for the Indian sector by the shortest route. In those circumstances the employer's estimation and bonafide conduct in not deducting tax on the LFC could not be faulted. The Tribunal held that once the employer's estimation was bona fide and reasonable, the foundation for demands under section 201 r.w.s. 192 collapsed and the impugned demands had to be vacated. The Tribunal therefore directed deletion of the demands raised by the Assessing Officer and upheld that approach even where travel involved en-route foreign travel or circuitous routes, as the factual matrix and legal principle were identical to the coordinate-bench ruling.Impugned demands under section 201(1) and 201(1A) for AYs 2010-11 and 2011-12 deleted; appeals allowed.Final Conclusion: Following and applying the coordinate-bench decision in the assessee's own case, the Tribunal held the employer's bona fide estimation under section 192 to be reasonable; the demands in respect of non-deduction of TDS on LFC for AY 2010-11 and AY 2011-12 were vacated and the appeals were allowed. Issues Involved:1. Limitation of orders under section 201(1) and 201(1A).2. Leave fare concession (LFC) involving en-route foreign travel.3. Leave fare concession (LFC) involving domestic travel by circuitous route.4. Bona fide belief regarding non-deduction of tax at source.Detailed Analysis:1. Limitation of Orders under Section 201(1) and 201(1A):The assessee contended that the orders under section 201(1) and 201(1A) were barred by limitation and therefore void-ab-initio. The CIT(A) held that the provisions of section 201(3), as amended by the Finance Act, 2014, are retrospective and apply to the assessment years in question. The CIT(A) also noted that for the purpose of the time limit mentioned in section 201(3), the date of filing the original TDS returns is relevant and not the correction statement. The CIT(A) concluded that once a correction statement is filed, it partakes the character of a statement filed under section 200(3) and is subject to scrutiny. The Tribunal found that these observations by the CIT(A) were without basis and contrary to the facts of the case.2. Leave Fare Concession (LFC) Involving En-route Foreign Travel:The CIT(A) held the assessee as an assessee in default for not deducting tax at source on LFC provided to employees involving en-route foreign travel. The CIT(A) relied on Circular No. 8/2012 for the purpose of tax deduction on salary payments for the financial year 2012-13. The assessee argued that the exemption under section 10(5) is available even if the journey involves a foreign leg, provided the designated place is in India and the employee actually visits the place. The Tribunal observed that the statutory provisions under section 10(5) and Rule 2B do not indicate any requirement of taking the shortest route for traveling to any place in India or any restrictions on the route. The Tribunal concluded that the employer's estimation of income was bona fide and reasonable, and thus, the demands raised under section 201 r.w.s. 192 were vacated.3. Leave Fare Concession (LFC) Involving Domestic Travel by Circuitous Route:The CIT(A) enhanced the assessment under section 251(1)(a) and held the assessee as an assessee in default regarding the exemption of LFC paid to employees who undertook domestic travel by a circuitous route. The CIT(A) noted that the exemption provided under section 10(5) is after considering the shortest route to the designated destination. The Tribunal followed the principle laid down by the coordinate Bench in the assessee's own case and found that the employer's estimation of income was bona fide and reasonable. Therefore, the demands raised under section 201 r.w.s. 192 were vacated.4. Bona Fide Belief:The assessee argued that it had a bona fide belief that it was not liable to deduct tax at source on LFC provided to employees, and therefore, it could not be held as an assessee in default under section 201 and 201(1A). The Tribunal agreed with the assessee's contention, emphasizing that the employer's estimation of income was bona fide and reasonable. The Tribunal noted that the employer cannot be faulted for not deducting tax at source if the conduct was honest and fair.Conclusion:The Tribunal deleted the demands raised by the AO and sustained by the CIT(A) for the assessment years 2010-11 and 2011-12. The Tribunal upheld the plea of the assessee and directed the AO to delete the impugned demands raised under section 201 r.w.s. 192. The appeals were allowed, and the orders pronounced on 12th October 2021.