TaxTMI 
TaxTMI 
2019 (7) TMI 1266
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....the Assessee for not levying penalty are identical 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 ....
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.... or after the 1st day of October, 1997, between such places, the amount eligible for exemption shall be :- (a) where a recognised public transport system 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 t....
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....r took a contrary view and held that when the travel is outside India irrespective of the fact that the ultimate destination is India, Tax ought to have been deducted at source. The Assessee was accordingly proceeded 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 pers....
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....atory or automatic because under Section 273B Parliament has enacted that penalty shall not be imposed in cases falling thereunder. Section 271C falls in the category of such cases. Section 273B states that notwithstanding anything contained in Section 271C, no penalty shall be imposed on the person or 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....
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....ch calls for interference. Accordingly the substantial question of law framed is answered in favour of the assessee and against the Revenue." (emphasis supplied) 9. In the present case, the Assessee was held to be an Assessee in default and orders u/s.200(1) & 200(1A) of the Act by the AO and the CIT(A). The Hon'ble ITAT 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 tax....
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....erefore, it was 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 employee(s) had actually utilized the amount(s) paid towards leave travel concession(s)/conveyance allowance. 11. We thus find that there is nothing specific which has been provided by CBDT in its 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) ....
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....nue's contention that the assessee bank has not deducted the tax intentionally, fully knowing that the LFC is applicable for travel in India only and no foreign travel is allowable as it is a case of error of judgment and no malafide can be assumed on part of the bank. Further, nothing has been brought on record which in any ways suggest connivance on part of the assessee 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 e....