TaxTMI 
TaxTMI 
2017 (4) TMI 109
X X X X Extracts X X X X
X X X X Extracts X X X X
....of law and facts of the case and without appreciation of the facts and circumstances of the case in their right perspective. 2. The learned CIT erred in passing an order under section 201(1)/ 201(1A) and in raising demand of Rs. 7,76,365/- (i. e. tax of Rs. 5,95,675/- and interest of Rs. 1,80,690/-) on the basis that tax was not deducted at source on payment of Leave Travel Concession. 3. The learned CIT erred in not appreciating that the benefit of Leave Travel Concession is available to the Bank's employee even in cases where the journey undertaken by an employee involves a foreign leg but the employee's designated place is in India and he actually visits the place as designated. 4. The learned CIT erred in making the following observation, holding as under: "I have carefully considered the arguments put forth by the appellant. Regarding the argument of the Assessee that exemption u/s 10(5) is not limited to travel only within India and is applicable to a case involving foreign leg in the tour. It is seen that section 10(5) read with Rule 2B is very clear in intent that the said provisions are applicable in connection with proceeding on leave t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....use notice dated 16. 12. 2014 and then another show- cause dated 08. 01. 2015 was served upon the Assessee to provide details of amounts used to travel out of India. In response to the Show Cause Notice, the Bank filed its reply on 02. 02. 2015 as under: S No. Name of Employee F. Y. 2012-13 Amount used to travel out of India TDS deducted and deposited on the amount 1 Shri K. M. Sharma 169026 0 2 Ashok Kumar Goyal 188607 0 3 Narendra Kumar 259815 0 4 Naveen Khanna 104483 0 5 Alok Nepaliya 108782 0 6 Saroj Vasan 274689 0 7 P. K. Gupta 424000 0 8 Sushil Kumar Jain 113386 0 9 Rajendra Kumar Dubey 342791 0 TOTAL 19,85,579 0 4. On perusal of the details submitted during the TDS assessment proceedings, the ACIT was of the view that LTC benefit under section 10(5) is not available as foreign destination is involved i. e, the places of travel are not situated in India, it cannot be termed as the shortest route to the designation in India, and the National carrier is not involved/used for purposes of the air travel. The....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ch cases the exemption u/s 10(5) is restricted to travel within India. It is further contended that 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. Moreover, the assessee has claimed that it was under bonafide belief that TDS is not deductible on the impugned payments. The assessee has also cited the interim order of Hon'ble Madras High Court dated 16-02-2015 directing the assessee not to deduct TDS on LFC payments till final decision of Writ Petition. 3. 4 I have carefully considered the arguments put forth by the appellant. Regarding the argument of the assessee that exemption u/s 10(5) is not limited to travel only within India and is applicable to a case involving foreign leg in the tour, it is seen that section 10(5) read with Rule 2B is very clear in intent that the said provisions are applicable in connection with proceeding on leave to any place in India. The appellant has in fact bent the interpretation of the said provisions in such a way which goes totally against the intent and spirit of these provisions. In all the cases involving foreign travel, one ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ourt were not available at the relevant time and the assessee was duty bound to deduct TDS on the impugned payments. This view is supported by the decision in the case of State Bank of India, Kanpur vs. DCIT in ITA No. 138 to 140/LKW/2015 dated 04-03-2016 of ITAT, Lucknow Bench. 3. 6 Respectfully following the above judgments of ITAT, Lucknow 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 assessee is in default for not deducting TDS on LTC/LFC payments. Ground nos. 2 to 7 are accordingly dismissed. " 7. We now refer to the contentions raised by the ld AR. The ld. AR of the assessee has submitted as under:- 7. 1 The provisions of LTC are governed by the industry level settlement viz. 'joint Notes', signed by the Indian Banks' Association [IBA] on behalf of the member banks and the representatives of Officers' Organizations after industry level settlement. 7. 2 Administrative and operating guidelines, issued by the Bank, are based on the clarifications issued by the Indian Banks' Association i. e. IBA letter Nos. PLI/Set/25 dated 18 September 1982 and CIR/HR&R/2012- 13....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ection 10(5) does not place a bar on travel to a foreign destination during the course of travel to a place in India. Similarly, detailed guidelines have been framed for the purpose of grant of exemption in terms of rule 2B - these guidelines do not restrict overseas travel while proceeding on leave to a place in India. In other words, if the intention of the legislature or the Central Board of Direct Taxes was to not allow exemption under section 10(5) in case a foreign leg was involved in the journey, it would have explicitly provided so. 7. 8. Rule 2B(1) of the Income-tax Rules, 1962 which deals with LTC are reproduced below for ready reference. "(1) The amount exempted under clause (5) of section 10 in respect of the value of travel concession or assistance received by or due to the individual from his employer or former employer for himself and his family, in connection with his proceeding,- (a) On leave to any place in India; (b) To any place in India after retirement from service or after the termination of his service. Shall be the amount actually incurred on the performance of such travel subject to the following conditions, namely:- ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....by the shortest route. This also appears to indicate that circuitous travel involving a foreign destination is permissible. 7. 11. It may be noted that 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. In other words, where the designated place in India is Kolkata and the travel itinerary is Mumbai- Kolkata-Singapore-Kolkata-Mumbai, exemption is granted only for travel between Mumbai and Kolkata. In terms of the requirements of rule 2B, the following other conditions are also satisfied: * The exemption is granted only for travel by economy class. * The air fare of the national carrier i. e. Air India is considered for the purpose of granting exemption. * The exemption is restricted to the actual amount incurred by the employee. 7. 12 It was accordingly submitted that the Bank provides the LTC exemption only where the employee's designated place is in India and he actually visits the place as designated. There is no bar under section 10(5) or rule 2B on travel outside India if designated place is in India. Rule 2B refers ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... made by the bank after rigorous checking of Bills at three levels. The payment is made on reimbursement basis after submission of original bills supporting and claim forms. The bills are paid only when the Employee visits the destination points and in none of the case the payment has been made by treating the notional expenses on shortest route in India even though the employees did not travel there at all. This statement of the Ld. CIT (Appeals) is totally untrue and not based on true facts. The Bank reimburses the LTC claim made by the employees only where the employee's designated place is anywhere in India and he actually visits the place as designated. 7. 15. Without prejudice to the position that the Bank has correctly granted exemption under section 10(5) to its employees at the time of deduction of tax at source, it was further submitted that the Bank is under a bona fide belief that even where the journey undertaken by an employee involves a foreign leg, the employee is entitled to exemption under section 10(5) when the employee's designated place is in India and he actually visits the place as designated. The Bank's view is based on, inter alia, the following: ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....43 ITR 435) (Delhi High Court) * CIT v. HCL Infor 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). 7. 18 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. (74 ITD 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) * Indian Airlines Ltd. (59 ITD 353) (Mumbai ITAT). * Eicher Goodearth Ltd. (ITA 1305/Del/1991) (Delhi ITAT). * KLM Royal Dutch Airlines (62 ITJ 268) (Delhi ITAT). 7. 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....emption would be limited to the expenditure incurred to the last destination in India. For the sake of reference, we 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 falling within any of the following clauses shall not be included- [(5) in the case of an individual, the value of any travel concession or assistance received by, or due to, him,- (a) from his employer for himself and his family, in connection with his proceeding on leave to any place in India ; (b) from his employer or former employer for himself and his family, in connection with his proceeding to any place in India after retirement from service or after the termination of his service, subject to such conditions as may be prescribed (including conditions as to number of journeys and the amount which shall be exempt per head) having regard to the travel concession or assistance granted to the employees of the Central Government: 9. On perusal of this section, we are of the view that this provision was introduced in order to motivate the employees and also to encourage touri....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eover, the ld. CIT(A) has directed the Assessing Officer to recalculate the liability of TDS at 10%. We, therefore, find no infirmity in the order of the ld. CIT(A) and we confirm the same. " 10. Similarly, the decision of the Coordinate Bench in case of Om Prakash Gupta vs ITO (supra) also supports the case of the Revenue wherein the Coordinate Bench has held as under: "12. The said sub-section provides that where an individual had received travel concession or assistance from his employer for proceeding on leave to any place in India, both for himself and his family, then such concession received by the employee is not taxable in the hands of the employee. Similar exemption is allowed to an employee proceeding to any place in India after retirement of service or after the termination of his service. The provisions of the Act are in relation to the travel concession/assistance given for proceeding on leave to any place in India and the said concession is thus exempt only where the employee has utilized the travel concession for travel within India. Further under Rule 2B of the Income Tax Rules the condition for allowing exemption under section 10(5) of the Act are laid....