Leave Fare Concession tax deduction default sustained where exemption failed and no specific interim restraint applied.

Where Leave Fare Concession travel included a foreign leg, the substantive exemption under section 10(5) was rejected on merits, leaving the employer with a withholding obligation under section 192. The Tribunal noted that interim judicial directions then in force could affect deduction only where they were binding and applicable to the assessee, but found no specific interim order shown for the assessee before it. On that basis, it treated the assessee as in default under section 201(1) for non-deduction of tax at source and sustained consequential interest under section 201(1A).

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Issues: Whether the assessee could be treated as an assessee in default under section 201(1) of the Income-tax Act, 1961, and charged interest under section 201(1A), for non-deduction of tax at source on Leave Fare Concession payments where the employees' travel included a foreign leg, despite interim judicial directions restraining deduction.

Analysis: The issue on the availability of exemption under section 10(5) for travel involving a foreign leg stood concluded on merits against the assessee. The dispute before the Tribunal was confined to the liability under section 201 for the relevant period. The Tribunal held that the assessee was bound by the interim directions of the High Court then in force and that the obligation to deduct tax under section 192 had to yield to those binding judicial orders. However, the Tribunal ultimately preferred to follow the Supreme Court's decision on the substantive tax position and treated the assessee as having had the statutory obligation to deduct tax. In the absence of a specific interim order applicable to the assessee before it, the Tribunal declined to exempt it from the consequence of non-deduction.

Conclusion: The assessee was held liable to be treated as an assessee in default under section 201(1), and the consequential interest under section 201(1A) was sustained.

Final Conclusion: The appeal failed, and the demand raised for non-deduction of tax at source on the impugned Leave Fare Concession payments remained undisturbed.

Ratio Decidendi: Where the substantive exemption claim is rejected on merits and no binding interim judicial restraint specific to the assessee is shown to override the withholding obligation, the assessee may be treated as an assessee in default under section 201(1) with consequential interest under section 201(1A).

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