TaxTMI 
TaxTMI 
2019 (7) TMI 1266
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....entical in all these cases. These cases were heard together and we deem it convenient to pass a common order. 2. Leave Travel Allowance (LTA) is the most common element of compensation adopted by employers to remunerate employees due to the tax benefits attached to it. LTA is the remuneration paid by an employer for Employee's travel in the country, when he is on leave with the family or alone. LTA amount is tax free. Section 10(5) of the Income-Tax Act, 1961, read with Rule 2B (Commonly known as LTA Rules), provides for the exemption and outlines the conditions subject to which LTA is exempt. As per LTA Rules, LTA exemption can be claimed where the employer provides LTA to employee for leave to any place in India taken by the employee and their family. Such exemption is limited to the extent of actual travel costs incurred by the employee. Travel within India only allowed- As per LTA Rules, travel has to be undertaken within India and overseas destinations are not covered for exemption. Sec.10(5) of the Act reads thus:- "Section: 10 (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 himse....
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....m exists, an amount not exceeding the 1st class or deluxe class fare, as the case may be, on such transport by the shortest route to the place of destination; and (b) where no recognised public transport system exists, an amount equivalent to the airconditioned first class rail fare, for the distance of the journey by the shortest route, as if the journey had been performed by rail.] (2) The exemption referred to in sub-rule (1) shall be available to an individual in respect of two journeys performed in a block of four calendar years commencing from the calendar year 1986 : [Provided that nothing contained in this sub-rule shall apply to the benefit already availed of by the assessee in respect of any number of journeys performed before the 1st day of April, 1989 except to the extent that the journey or journeys so performed shall be taken into account for computing the limit of two journeys specified in this sub-rule.] (3) Where such travel concession or assistance is not availed of by the individual during any such block of four calendar years, an amount in respect of the value of the travel concession or assistance, if any, first availed of by the individual during first....
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....ed u/s.200(1) & 200(1A) of the Act for failure to deduct tax at source and was held to be an Assessee in default in respect of taxes not deducted at source and also liable for interest on such tax not deducted at source and paid to the Government, from the date on which it ought to have been deducted and paid to the Government till the date on which the same is paid to the credit of the Central Government. Over and above the obligation u/s.200 of the Act, the Assessee is also liable for imposition of penalty u/s.271-C of the Act for the failure to deduct Tax at source. The provisions of Sec.271-C reads thus:- "Section: 271C. 1) If any person fails to- a) deduct the whole or any part of the tax as required by or under the provisions of Chapter XVIIB; Or b) pay the whole or any part of the tax as required by or under- i. sub-section (2) of section 115-O; or ii. the second proviso to section 194B, then, such person shall be liable to pay, by way of penalty, a sum equal to the amount of tax which such person failed to deduct or pay as aforesaid. 2) Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner." 6. However, Section 273B of the A....
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....r the assessee for failure to deduct tax at source if such person or the assessee proves that there was a reasonable cause for the said failure. Therefore, the liability to levy of penalty can be fastened only on 44 the person who do not have good and sufficient reason for not deducting tax at source. Only those persons will be liable to penalty who do not have good and sufficient reason for not deducting the tax. The burden, of course, is on the person to prove such good and sufficient reason. In each of the 104 cases before us, we find that non-deduction of tax at source took place on account of controversial addition. The concept of aggregation or consolidation of the entire income chargeable under the head "Salaries" being exigible to deduction of tax at source under Section 192 was a nascent issue. It has not be considered by this Court before. Further, in most of these cases, the tax- deductor-assessee has not claimed deduction under Section 40(a)(iii) in computation of its business income. This is one more reason for not imposing penalty under Section 271C because by not claiming deduction under Section 40(a)(iii), in some cases, higher corporate tax has been paid to the ext....
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....has also confirmed the orders of the revenue authorities on this issue. The Assessee is in appeal before the Hon'ble Karnataka High Court against the said orders and the Hon'ble Karnataka High Court in ITA No.634/2017 by order dated 22.11.2018 admitted the appeal framing the following substantial question of law:- (i) Whether the Tribunal was justified in holding that for the purposes of exemption under section 10(5) of the Act, travel by the employees would only have to be within India, without appreciating that the said provision does not prohibit travel outside India but only limits the exemption available to the employees under the said provision to reimbursements for travel within India? (ii) Whether the Tribunal was justified in holding that the Appellants were assessee-in-default under section 201 of the Act for short deduction of taxes at source under Section 192 of the Act, when the said provision only envisages a fair estimate of the income of the employees and not mathematically precise computation by the employer for the purposes of tax deduction at source? 10. The Revenue authorities proceeded to impose penalty u/s.271C on the Assessee rejecting the plea of the As....
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....s circular issued under section 192 for the relevant financial year. What has been reiterated is adherence to the provisions as contained in section 10(5) read with Rule 2B. Similarly, the Hon'ble Supreme Court has also held that an assessee employer is under no statutory obligation under the Income-tax Act, 1961, and/or the Rules to collect evidence to show that its employees had actually utilized the amount paid towards leave travel concession. Even though the same is not required as per decision referred supra, in the instant case, the assessee bank has been diligent, and has collected and brought on record evidence to show that its employees had actually utilized the amount paid towards leave travel concession. 12. At the same time, in terms of adherence to the provisions as contained in section 10(5) read with Rule 2B, we find that the assessee bank has allowed exemption to all its employees who have submitted LFC claim. The Revenue has not disputed the LFC claim in respect of these employees except in respect of 12 employees. These 12 employees, who have travelled to foreign countries as part of their travel itinerary with designated place of travel in India, and in res....
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....e bank or forged claims submitted by the employees and which has been discovered by the Revenue during the course of its examination. As fairly submitted by the assessee bank, while calculating the estimated tax liability of its employees, it always consider LFC claim as exempt under section 10(5)and the same position, being followed and accepted consistently in the past years, was followed in the current financial year as well. However, for the first time, after the survey by the tax department, this issue arose for consideration and after the judgment of the Tribunal, the matter got clarified and the assessee bank has duly complied and deposited the outstanding demand along with interest and has taken corrective steps in subsequent years as well. 13. In light of above discussions and in the entirety of facts and circumstances of the case, we are of the considered view that there was reasonable cause in terms of section 273B of the Act for not deducting tax by the assessee Bank. In the result, the penalty so levied under section 271C is hereby directed to be deleted." 12. The learned DR relied on the order of CIT(A) and further drew our attention to a decision of ITAT Bangalo....