TaxTMI 
TaxTMI 
2026 (5) TMI 605
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.... "In our cases assessing officer has disallowed exemption u/s. 10(5) of Income Tax Act, on the base of differences in interpretation of law and treated us as assessee in default and passed order against us u/s. 201(1) and 201(1A) of the Income Tax Act and we filed appeal against said order before CIT (Appeals), which is dismissed and order was issued u/s. 250 of the Income Tax Act. The Kerala High Court has held in a recent judgment that State Bank of India (SBI) cannot be treated as an "Assessee in Default" under section 201 of the Income Tax act for not deducting Tax at Source (TDS) on Leave Travel Concession (LTC) payments, as it was bound by an interim order which prohibited such deduction. The copy of said order is attached herewith. Therefore against said order u/s. 250 and u/s. 201(1) and 201(1A), we prefer to file appeal before ITAT and furnished facts of the case along with said appeal along with relevant documentary evidences and we demand the withdrawal of the same from your honour by allowing our appeal on the basis of grounds and evidences furnished by us." ITA No. 1044/Ahd/2026 (A.Y. 2017-18) "In our cases assessing officer has disa....
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....ection 10(5) is not available. 4. The assessee before the Assessing Officer contended that the designated place of travel of employees was within India and reimbursement was restricted only to the eligible fare relatable to Indian travel in accordance with Rule 2B of the Rules. It was further contended that there was no express statutory prohibition against an incidental foreign leg in the course of travel and the bank had acted under a bona fide belief based on prevailing industry practice, IBA guidelines and judicial precedents. The assessee also relied upon interim orders passed by the Hon'ble Madras High Court in the case of All India State Bank Officers Federation vs. State Bank of India, wherein the Hon'ble High Court had specifically directed that LFC reimbursement would not amount to income for the purpose of deduction of tax at source and further clarified that in case the writ petition failed, the liability to pay tax would be on the employees. The assessee submitted that during the subsistence of such interim judicial directions, it was legally restrained from deducting tax at source and any contrary action would have amounted to disobedience of binding judicial order....
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....n of the Chennai Bench of the Tribunal in State Bank of India, Chennai vs. ACIT, TDS, Chennai in ITA No.1465/Chny/2024 dated 27.06.2025, wherein the Tribunal had upheld the action of the Department for periods during which no active stay operated. Accordingly, the learned CIT(Appeals) confirmed the action of the Assessing Officer in treating the assessee as an assessee in default under section 201(1) and in levying consequential interest under section 201(1A), though directions were issued for staying recovery till disposal of proceedings before higher judicial forums and for rectification of computational errors, if any. 8. The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee. 9. We have heard the rival submissions and perused the material available on record. The short controversy before us is not with regard to the merits of exemption under section 10(5) of the Act, which now admittedly stands concluded against the assessee by the judgment of the Hon'ble Supreme Court in State Bank of India v. Assistant Commissioner of Income Tax [2022] 144 taxmann.com 131 (SC). 10. The limited issue before us is whether, in ....
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....ate Bench further relied upon the decision of the Agra Bench of the Tribunal in State Bank of India v. CIT(Appeals) and the judgment of the Hon'ble Kerala High Court in State Bank of India v. CIT. The findings of the Hon'ble Kerala High Court, as reproduced by the Coordinate Bench, are relevant and are reproduced below: "It is only when the appellant-assessee, after having a liability to deduct tax, fails to do so, the question of invoking Section 201 of the Act and treating it as an 'assessee in default' arises. Here, the Madras High Court found, prima facie, that the amount paid would not be the income of a payee so as to deduct tax. Therefore, we are of the opinion that the provisions of Section 201(1) of the Act are not attracted to the case at hand." "The appellant-assessee was under an obligation not to deduct tax at source and therefore, the assessee could not be held to be assessee in-default for non-deduction of tax at source on impugned LFC payments." 14. The Ahmedabad Bench thereafter held as under: "In the present case also, the facts are materially identical. The assessee was operating under the binding interim directions of the Ho....