2022 (7) TMI 291 - HC - Income Tax

Bank officers' LTC facility withdrawal upheld as per policy, tax implications under Income Tax Act.

All India State Bank Officers Federation (Regn No. 727/MDS), All India Bank Officers' Confederation, (Regd. No. 3427/Delhi), K. Bhavanisankar Versus State Bank of India, The Deputy Managing Director & Corporate Development Officer, Indian Bank's Association, Commissioner of Income Tax (TDS)

The court upheld the validity of circulars withdrawing the Leave Travel Concession (LTC) facility for foreign travel for bank officers. It found that the ... Benefit of LTC/HTC to cover foreign travel - TDS liability - Leave Travel Concessions to the officers of the Public Sector Undertakings - HELD THAT:- Regarding the submission of the Income Tax Department, no doubt, the provisions of the Act are to be applied scrupulously. Under Section 10(5) of the Income Tax Act, Travel Concession within India alone is exempted. The Travel Concession, if extended to other countries, then the exemption Clause cannot be applied and the persons are liable to pay tax under the said provision. Thus, the Income Tax Department is empowered to invoke the provisions, if the Travel Concession is extended to abroad and in all such cases, they are liable to deduct TDS as applicable and by following the procedures as contemplated under the Income Tax Act. When the Government of India specifically passed a memorandum that the Leave Travel Concessions to the officers of the Public Sector Undertakings and others to be restricted on par with the Government of India scheme, then there is a context and meaning with reference to certain foreign affairs and therefore, there is no infirmity in respect of the order impugned passed by the respondents in cancelling the concession extended to travel abroad under Leave Travel Concession facility. Rule 44 of the State Bank of India Officers Service Rules, 1992, regarding Leave Travel Concession and Leave Encashment are comprehensive and provides the procedures, definitions etc., The said Rule alone would have the Statutory enforceability. Government of India Memorandum dated 30.04.2014 states that the Public Sector Banks have to adopt the LTC scheme of the Government of India. The letter itself reveals that there are certain reasons and implications in respect of allowing such Bank officials to travel abroad under the LTC scheme as it relates to External Affairs of the country. The said Circular of the Government of India was implemented by the Indian Bank Association and based on the said decision, the State Bank of India also issued the Circular, withdrawing the facility to the officers to travel abroad. Thus, the Government of India policy regarding the Leave Travel Concession to the officers of the Public Sector Banks also to be followed in the interest of public. The instructions earlier issued to facilitate the officers of the Bank to get reimbursement for foreign travel, which is not in consonance with Rule 44 of the State Bank of India Officers Service Rules, 1992 cannot be therefore, construed as an absolute right conferred on the officers of the State Bank of India nor there is a bipartite agreement or settlement exists between the parties. Thus, there is no infringement of service rights or violation of service conditions, as there is no withdrawal of benefit conferred to the officers of the State Bank of India under Rule 44 of the State Bank of India Officers Service Rules, 1992. The concession and the facility extended to get reimbursement of the foreign travel expenses, was given by way of an additional facility through a letter and such letter was cancelled and the facility was withdrawn pursuant to the orders of the Government of India, Ministry of Finance and the Circular issued by the Indian Bank Association. The policy of the Government of India, Ministry of Finance is to be followed in the interest of public by all the Public Sector Banks, which was adopted by the Indian Bank Association. This being the factum established, there is no further scope for any discussion or negotiation with the officers of the State Bank of India as the withdrawal of such additional facility would not infringe the service rights or result in violation of service conditions of the officers of the State Bank of India. Providing an opportunity in such circumstances is a futile exercise and furthermore, the officers of the Bank are not prejudiced nor their service rights are violated. The executive actions regarding the foreign affairs should be viewed with greater latitude and the decision being taken by the State Bank of India is pursuant to the Government of India policy, which was adopted by Indian Bank Association. Thus, this Court do not find any perversity or infirmity in respect of the decision taken by the State Bank of India based on the policy decision of the Government of India, which was adopted by the Indian Bank Association. Issues Involved:1. Validity of the Circular dated 07.04.2014 issued by the third respondent and the e-Circular dated 15.4.2014 issued by the 1st respondent.2. Continuation of LTC/HTC to cover foreign travel for officers of the respondent-Bank.3. Whether the withdrawal of LTC covering overseas travel was unilateral and without notice.4. Whether the withdrawal of LTC covering overseas travel infringes the service rights or violates service conditions.5. Applicability of principles of natural justice in the withdrawal of LTC covering overseas travel.6. Tax implications under the Income Tax Act, 1961, for LTC covering foreign travel.Detailed Analysis:1. Validity of the Circular dated 07.04.2014 and e-Circular dated 15.4.2014:The petitioners challenged the validity of the Circular dated 07.04.2014 issued by the Indian Bank's Association (IBA) and the subsequent e-Circular dated 15.4.2014 issued by the State Bank of India (SBI). These circulars withdrew the Leave Travel Concession (LTC) facility for foreign travel for bank officers. The court noted that the LTC facility for foreign travel was initially provided through non-statutory circulars and administrative instructions, which did not have statutory force. The court upheld the validity of the circulars, stating that they were issued in accordance with the policy decisions taken by the Government of India and adopted by the IBA.2. Continuation of LTC/HTC to cover foreign travel:The petitioners argued that the LTC facility to cover foreign travel had been in place since 1982 and should continue. The court found that Rule 44 of the State Bank of India Officers Service Rules, 1992, only permitted LTC for travel within India. The extension of LTC to cover foreign travel was not supported by any statutory provision and was merely an additional facility provided through administrative instructions. Therefore, the withdrawal of this facility did not violate any statutory right of the officers.3. Unilateral Withdrawal of LTC Covering Overseas Travel:The petitioners contended that the withdrawal of LTC covering overseas travel was done unilaterally without prior notice or discussion, causing irreparable injury to the officers. The court found that the decision to withdraw the facility was taken after discussions within the IBA and was based on a policy decision by the Government of India to prevent misuse of the facility. The court held that the withdrawal was not unilateral but was part of a broader policy decision.4. Infringement of Service Rights or Violation of Service Conditions:The court examined whether the withdrawal of LTC for foreign travel infringed the service rights or violated the service conditions of the officers. It concluded that Rule 44 of the State Bank of India Officers Service Rules, 1992, did not provide for LTC to foreign destinations. The additional facility provided through administrative instructions did not have statutory backing and could be withdrawn without infringing any service rights or conditions.5. Applicability of Principles of Natural Justice:The petitioners argued that the withdrawal of the LTC facility without providing an opportunity to be heard violated the principles of natural justice. The court noted that natural justice principles are flexible and must be applied contextually. In this case, since the withdrawal of the facility did not infringe any statutory rights and was based on a policy decision, the requirement for a hearing did not apply. The court cited the Supreme Court's judgment in State of U.P Vs. Sudhir Kumar Singh, which emphasized that natural justice principles must be applied based on the facts and circumstances of each case.6. Tax Implications under the Income Tax Act, 1961:The Income Tax Department argued that LTC for travel outside India was not exempt under Section 10(5) of the Income Tax Act, 1961, and was subject to tax. The court agreed, stating that the exemption under Section 10(5) specifically applied to travel within India. Therefore, any LTC amount received for foreign travel would be considered a perquisite and subject to tax. The court upheld the Income Tax Department's position that tax should be deducted at source for LTC covering foreign travel.Conclusion:The court dismissed the writ petition, upholding the validity of the circulars withdrawing the LTC facility for foreign travel. It concluded that the withdrawal did not violate any statutory rights, service conditions, or principles of natural justice. The court also affirmed the tax implications for LTC covering foreign travel under the Income Tax Act, 1961.