TaxTMI 
TaxTMI 
2021 (2) TMI 28
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....ession 2.1. LFC involving en-route foreign travel 2.1.1. The learned CIT(A) erred in holding the appellant as assessee in default on account of non-deduction of tax at source in respect of leave fare concession [LFC] provided by the appellant to its employees amounting to Rs. 3,09,576/- in cases where LFC was paid by the shortest route for a journey where the designated place was in India but the same also involved some en-route foreign travel being undertaken by the employee. 2.1.2. The learned CIT(A) erred in not appreciating that the benefit of exemption under section 10(5) is available to the appellant's employees' even in cases where the journey undertaken by an employee involves a foreign leg, but where the employee's designated place is in India and he actually visits the place as designated. 2.1.3. The learned CIT(A) erred in relying on the Circular No. 8/2012 [F.No. 275/192/2012- IT(B)] dated 5 October 2012 issued by the Central Board of Direct Taxes for the purpose of tax deduction on salary payments for financial year 2012-13 for the captioned assessment year. 2.1.4. The learned CIT(A) erred in not appreciating tha....
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....emption under section 10(5) was not available in such cases as "if the employee travels out of India, the LFC amount cannot be claimed as exempt under section 10(5)", and, to that extent, the assessee was in error in not deducting tax at source in respect of such payment of the LFC facility. The Assessing Officer also noted that "the employees travelled to the Indian destinations not by direct and shortest route but by circuitous route including foreign journey". It was in this backdrop that the Assessing Officer held that the LFC payment should have been included in the income of the employee concerned while deducting tax at source from the salaries, and the Assessing Officer also held that the assessee is required to be treated as an assessee in default for not deducting the related tax at source. Aggrieved, the assessee carried the matter in appeal before the CIT(A). In a very detailed statement of facts filed before the learned CIT(A), the assessee, inter alia, explained as follows: 9. The provisions of LTC are governed by the industry level settlement viz. 'joint Notes', signed by the Indian Banks' Association [ISA] on behalf of the member banks and the....
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....itted that the Bank's framework for provision of LTC benefit to employees and the administrative and operating guidelines issued by the IBA are framed taking into account the provisions of the Income-tax Act, 1961 and the Income-tax Rules, 1962. Benefit granted by Bank only for travel to a place in India Section 10(5) requires that the exemption is available for proceeding on leave to any place in India. In this connection, the Bank has granted the benefit of exemption under section 10(5) to the employees only in cases where the designated place of travel of the employee has been a place in India. In other words, the Bank m no case has granted the benefit of exemption under section 10(5) to employees where the designated place of travel is outside India. Similarly, the benefit is granted only when the employee actually visits the designated place in India. No bar on travel outside India if designated place is in India 19. Section 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 i....
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.... of exemption under section 10(5) is restricted to expenditure by j the shortest route from the place of origin to the destination. This clearly means that rule 2B envisages that a person can travel by a circuitous route to the designated place in India. 23. In other words, rule 2B supports the stand that an employee can travel to various/ places during the course of his travel to his ultimate destination in India. As discussed earlier, there is no requirement that such places travelled should be within India i.e. they can be outside India as well. 24. The annual Circular on TDS from salaries for financial year 2013-14 (CBDT Circular No. 8/2013 dated 10 October 2013) clarifies that where the journey is performed in a circuitous route, the exemption is limited to what is admissible by the shortest route. Likewise, where the journey is performed in a circular form touching different places, the exemption is limited to what is admissible for the journey from the place of origin to the farthest point reached in India, by the shortest route. This also appears to indicate that circuitous travel involving a foreign destination is permissible. All conditions of s....
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.... time of deduction of tax at source, it is submitted that the branch 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. 31. The branch view is based on, inter alia, the following: * The Bank's framework for provision of LTC benefit to employees and the administrative and operating guidelines issued by the IBA are framed taking into account the provisions of the Income-tax Act, 1961 and the Income-tax Rules, 1962. * The provisions of LTC are governed by the industry level settlement viz. 'joint Notes', signed by the IBA and the representatives of Officers' Organisations after industry level settlement. * This is the normal industry practice that has been followed by all public sector banks for several years and it has not been challenged till date. * It may be noted that in around approximately 20-25% of the cases of LTC, a foreign leg is involved. In other words, in around 75-80% of cases, there is no foreign le....
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....ted Cements Co. Ltd. (74ITD 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 TTJ 268) (Delhi ITAT). 38. It is reiterated that it was the bonafide belief of the Bank that it was not liable to deduct tax at source in respect of LTC provided to employees. In other words, the Bank had deducted appropriate tax at source on the basis of the prevalent law and there was no default on the part of the Bank in deducting tax at source. Accordingly, the Bank cannot be held to be an assessee in default within the j meaning of section 201. Exemption for Indian leg 39. Without prejudice to the above, the branch submits that if at all the LTC payments involving a foreign leg are to be held as taxable, the employee is entitled for exemption under section 10(5) to the extent of expenses incurred for travel in India where the emplo....
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....e, 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 failing within any of the following clauses shall not be included- ITA No. 145 & 146/JP/17 and S.A. No.04 & 05/JP/2017 State Bank of India, Jaipur Vs. ACIT, TDS, Jaipur (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 tourism in India and, theref....
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....IDS intentionally on the reimbursement of expenditure incurred on LTC/LFC. Moreover, the Id. CIT(A) has directed the Assessing IT A No. 145 & 146/JP/17 and S.A. No. 04 & 05/JP/2017 State Bank of India, Jaipur Vs. ACIT, TDS, Jaipur Officer to recalculate the liability of TDS at 10%. We, therefore, find no infirmity in the order of the Id. 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 a,, 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 empl....
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....Jaipur Vs. ACIT, TDS, Jaipur liability is not in accordance with the provisions of section 792 and the AO has been directed to compute TDS in case of each employee according to the tax slab in which each employee falls. This ground is thus infructuous and is hereby dismissed. 11. Regarding ground no. 8, the Id CIT(A) has already the AO to compute interest u/s 201(1 A) with reference to the actual date of payment of LTC in each case. This ground is thus infructuous and is hereby dismissed. 12. In the result, we confirm the findings of the Id CIT(A) and the appeal of the assessee is dismissed. ITA No. 146/JP/17 The facts of the case are pari-materia with the facts as noted in ITA No. 145/JP/17 and our findings contained therein shall mutatis-mutandis in this appeal as well. In the result, the appeal of the assessee is dismissed. S.A. No. 04 & 05/JP/2017 In terms of quantum of tax demand raised in both the years under considerations, we direct the AO to give effect to the directions as contained In the Ld CIT(A) order, if its not done already, regarding applying the correct rate of tax for determining the TDS liability as well as the period for which interes....
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.... India, and consequently the appellant's petition is dismissed on this issue. In the light of above legal and factual details the amount of Rs. 3,09,576/- paid to the employees by the bank(where the journey has been taken outside India) is to be considered as the amount for which the bank is to be treated as deemed defaulter as per provisions of section 201(1). This amount is confirmed. The interest u/s 201(1A) determined by the TDS AO is also being confirmed. 5. The assessee is not satisfied and is in further appeal before us. 6. None appeared for the assessee, but, on careful consideration of all the related factors, including smallness of the amount involved and the fact that the issue in the appeal is a neatly identified legal issue in the case of a public sector undertaking assessee, we have deemed it fit and proper to dispose of the matter ex-parte qua the assessee on the basis of material on record and in the light of the submissions of the learned Departmental Representative. We, accordingly, proceed to take up the appeal for adjudication on merits. We have heard the learned Departmental Representative, perused the material on record, and duly considered ....
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....found that the estimate made by the employer is incorrect, this fact alone, without anything more, would not inevitably lead to the inference that the employer has not acted honestly and fairly. Unless that inference can be reasonably raised against an employer, no fault can be found with him. It cannot be held that he has not deducted tax on the estimated income of the employee". We humbly bow to the law so laid down by Their Lordships, and this, in our humble understanding, the correct and applicable legal position consistently followed by several coordinate benches of this Tribunal. There is not even a whisper of dissent on this point. It is in this light that we have, therefore, proceed further. The question that we need to, therefore, address is whether the action of the employer in not deducting tax at source from the leave travel facility in question could be said to be reasonable or bonafide. Let us, in this backdrop, take a look at the related legal provisions under section 10(5) read with rule 2 B: Section 10(5)- exemption in respect of leave travel concession 10. In computing the total income of a previous year of any person, any income falling withi....
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....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 air-conditioned first class rail fare, for the distance of the journey by the shortest route, as if the journey had been performed by rail. (remaining statutory provision not reproduced as it is not considered to be relevant for the present discussion) 8. A plain reading of the above provisions does not indicate any requirement of taking the shortest route for travelling to "any place in India" or putting any kind of restrictions the route to be adopted for going to such a destination. Quite to the contrary, the statutory provisions do envisage the possibilities of someone taking a route other than the shortest route, as is implicit in the restriction that "an amount not exceeding the air economy fare of the national carrier by the shortest route to the place of destination" ....
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....sis of the legal position and the factual backdrop, whatever may be the position with respect of taxability of such a leave travel concession in the hands of the employee, the assessee employer cannot be faulted for not deducting tax at source from the leave travel concession facility allowed by him to the employees. As we hold so, we may add that we have not really addressed ourselves to the larger question with respect to the actual taxability of this leave travel concession in the hands of the employees concerned, even though we have our prima facie reservations on the coordinate benches decisions holding taxability of these amounts in the hands of the employees concerned, because that aspect of the matter is not really relevant as on now. We leave it at that for the time being. The coordinate bench decisions deal with only the issue of taxability of leave travel facility under section 10(5) and not with the broader question about the nature of tax deduction at source liability under section 192, as also the issue about bonafides of the stand of the assessee employer. These decisions, therefore, do not come in the way of our present decision. Once we hold, as we do in this case,....