2026 (4) TMI 1886

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....assessee has raised the following grounds of appeal: In our case 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 an 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 judgement 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 Tat at Source (TDS) on Leave Travel Concession (LTC) payments, as it was bound by an interim order which prohib....

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.... 12. At the outset, we note that the issue on merits regarding allowability of exemption under section 10(5) of the Act in cases where the journey involves a foreign leg now stands concluded against the assessee by the judgment of the Hon'ble Supreme Court dated 04.11.2022. There is no dispute on this legal position and the same is duly acknowledged. However, the limited controversy before us is whether, in the peculiar facts of the present case, the assessee can be treated as an "assessee in default" under section 201(1) of the Act for non-deduction of tax at source during the relevant period. 13. The contention of the assessee has consistently been that during the year under consideration, it was bound by the interim orders passe....

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....und to follow the interim directions of the Hon'ble High Court. The Tribunal categorically observed that the assessee had no option but to comply with the orders of the Hon'ble High Court and non deduction of tax in such circumstances could not invite the rigours of section 201(1) and 201(1A) of the Act. 16. More importantly, the Hon'ble Kerala High Court in ITA No.45 of 2025 (order dated 18th November 2025) has examined this issue in detail and has held in favour of the assessee. The relevant findings of the Hon'ble High Court, which have a direct bearing on the issue before us, are reproduced below for ready reference: "The interim order granted by this Court is explained to the effect that any amount paid to the petitio....