AI Drafter 
TaxTMI 
TaxTMI 
2025 (6) TMI 622
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....ng to Rs. 2,11,598/- 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. 3. That the Learned CIT (A) erred in failing to appreciate that the benefit of exemption under section 10(5) of the Income Tax Act, 1961 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. 4. That the Learned CIT (A) erred in relying on the circular issued by the Central Board of Direct Taxes for the purpose of tax deduction on salary payments for the Financial Year- 2012-13. 5. That the Learned CIT (A) erred in failing to appreciate that the appellant provided exemption under section 10(5) of the Income Tax Act, 1961 only when the employee's designated place is in India and he actually visits the place as designated. Further, even in cases where the employee travels outside India during the course of his travel to a place in India, the exemption under section 1....
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.... of the Income Tax Act, 1961 only when the employee's designated place is in India and he actually visits the place as designated. Further, 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 with in India. Further, all conditions under section 10(5) Of Income Tax Act, 1961 and Rules 2B are satisfied. 6. That the Learned CIT (A) erred in not appreciating that if at all the LFC payments involving a foreign leg are to be held as taxable, the employee is entitled for exemption under section 10(5) Of Income Tax Act, 1961 to the extent of expenses incurred for travel in India where the employee's designated place is in India and he actually visits the place designated. 7. That the Learned CIT (A) erred in failing to appreciate that the appellant was of the bona fide belief that it was not liable to deduct tax at source in respect of LFC provide to employees, and accordingly the appellant cannot be held to be an assessee in default within the meaning of section 201 and 201(1A) of Income Tax Act, 1961. Each one of the above grounds of appeal is witho....
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....ted 04.04.2018, 22.05.2018, 04.07.2019, 16.03.2020 & 11.01.2021 were issued to the deductor assessee requesting therein to furnish the relevant information in respect of above payment/reimbursement alongwith reasons regarding non deduction of TDS against above payment/reimbursement. 3. In compliance to show cause notice u/s. 201(1)/201(1A) of the Income Tax. Act, 1961 as referred above, Assistant General Manager, S.M.E. Centre, Kanpur vide reply dated 13.04.2018, 05.06.2018 & 15,07.2019 has submitted that section 10(5) of the Income Tax Act, 1961 dose not place a bar on travel to a foreign destination during the course of travel to a place in India and further submitted that detailed guidelines have been framed for the purpose of grant of exemption in terms of Rule 2B of the Income Tax Rule, 1962, these guidelines do not restrict overseas travel while proceeding on leave to a place in India. In others words, if the intention of the legislature or the Centre 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. At various place in the rules, there is a reference to the fa....
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....t is not exempt under section 10(5) of the Income-tax Act, 1961 and the assesse was liable to deduct tax at source on such payment / reimbursement but the assesse has failed to do so which require taxation on the basis of slab. 6. Further, a D.O. No. 1 (434)/DIT(434/DIT(R&TPS/2017-18 dated 02.02.2018 of Hon'ble Member, CBDT, New Delhi& Special Secretary to the Govt. of India has been received which stipulates that it is not legally correct to avoid deduction of tax on payment/reimbursement on account of LFC/LTC. 7. Since, the reply submitted by the deductor assessee was not found acceptable, therefore vide show cause dated 11.01.2021 and 29.01.2021 fixing the date 21.01.2021 & 08.02.2021 respectively, assessee was asked as to why he may not be treated as assessee in default for non- deduction of tax at source in respect of payment of Rs. 2,11,598/- made to Shri Paritosh Sharma on account of LFC and demand u/s. 201(1) & 201 (1A) of the I.T. Act, 1961 may not be initiated against such default. Vide show cause dated 29.01.2021, it has also clearly been mentioned that in case of non receipt of any communication till the given date, it will be presumed that assesse....
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....k that Bank has correctly granted exemption u/s 10(5) to its employees at the time deduction of tax at source., it is submitted that in the present circumstance and facts of the case, the Bank can not be treated as an assessee in default in term of section 201. The appellant has also cited several judicial decisions in support. 7. The submissions and the contentions of the appellant have been considered. Admittedly as recorded by the AO, the Bank allowed LTC payments to its employees for travel to a place in India including the travel to a foreign destination without making any TDS. As per provisions of section 10(5) of the Act, only the reimbursement of travel concession or assistance to an employee is exempted which was incurred for travel of the individual employee or his family members to any place in India. Nowhere in this clause it has been stated that even if the employee travels to foreign countries, exemption would be limited to the expenditure incurred to the last destinations in India. From the details furnished by the Bank, it is clear that the employees have travelled to foreign country. Undisputedly, in the instant case, the employees of the deductor have tra....
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....t have entertained a belief that it was not liable to deduct tax at source on such a LTC claim and that the same was exempt under Section 10(5) of the Act. The CBDT circular No 8/2013 dated 10 October 2013 clarifies that exemption is limited to what is admissible through shortest route if the journey is performed in a circuitous route. 7.3 The Honble' ITAT Bengaluru in the case of Syndicate Bank vide order dated 06-04-2017 has decided the issue in favour of revenue. The Hon'ble ITAT, Lucknow Bench 'A' in the case of SBI on identical facts had decided the issue in favour of Revenue. For appreciation of facts, the relevant portion of the findings of the Hon'ble Bench is extracted below: "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, therefore, the reimbursement of LTC/LFC was exempted, but, there was no intention of the Legislature to allow the employees to travel abroad under the garb of benefit of LTC available by virtue of section 10(5) of the Act. Undisputedly, in the instant case, the employees of the assessee have travelled ....