Employer's LTA exemption claims u/s10(5): reliance on employee declarations without travel tickets upheld; no s.201 default

The dominant issue was whether the employer was an "assessee in default" under s. 201 for not deducting tax under s. 192 on LTA claimed as exempt under s. 10(5). The Tribunal held that, absent any material showing the LTA claim was false, the employer was entitled to rely on employees' declarations in prescribed forms; neither the Act nor the Rules required collecting travel tickets, and consistent past acceptance by the Revenue supported the employer's bona fide conduct. The contrary precedent involving unverified fixed allowances was distinguished. Consequently, the employer was not liable under s. 201, and interest under s. 201(1A) was not leviable; the appeal was allowed.

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Issues involved: Appeal against order under s. 201/201(1A) of the Act regarding LTA exemption.

Summary:
The assessee appealed against the order upholding default under s. 201/201(1A) of the Act for not deducting tax on Leave Travel Allowance (LTA) claimed as exempt under s. 10(5). The AO held the assessee in default despite submission of employee-filled proforma supporting LTA disbursement. The first appellate authority affirmed the AO's decision.

The assessee contended that no requirement exists u/r Act to demand railway ticket copies, citing employee-filled forms as proof of LTA disbursement genuineness. The counsel argued that the employer's duty is to deduct tax on estimated income of employees under s. 192, relying on relevant case laws. The Departmental Representative claimed LTA exemption is subject to actual employee utilization, asserting the assessee's default under s. 201(1).

After considering both sides, it was found that the Revenue disputed the assessee's entitlement to LTA exemption under s. 10(5). The AO disallowed relief due to lack of further evidence from employees, alleging LTA amounts were not spent on journeys. However, no evidence was presented to disprove employee declarations. Previous exemptions granted under similar circumstances were noted. The Tribunal concluded that the assessee's actions were honest and fair, as evidenced by past exemptions and employee certifications. Lack of evidence to prove non-utilization of LTA by employees led to the appeal being allowed, with the assessee not deemed in default under s. 201 and interest under s. 201(1A) not levied.

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