TaxTMI 
TaxTMI 
2026 (8) TMI 261
X X X X Extracts X X X X
X X X X Extracts X X X X
....sed of vide this common order. For the sake of clarity and convenience the facts relevant in the ITA No. 938/CHNY/2026 for the Assessment Year 2017-18 are stated herein: 3. The Assessee in ITA No. 938/CHNY/2026 raised the following grounds of appeal : "1. The Learned Commissioner of Income-tax (Appeals) ("CIT(A)") erred in confirming the order of the Assessing Officer ("AO") holding the appellant to be an assessee in default for failing to deduct tax at source under section 192 of the Income-tax Act, 1961 ('the Act'). 2. The CIT(A) erred in not appreciating that the Appellant had issued e- Circular no. CDO/P&HRD-PM/7/2014-15 dated 15th April 2014 stating that the employees shall not be entitled to visit overseas countries/ centers as part of leave travel concession ("LTC") which Circular was challenged by the All India State Bank Officers Federation & Ors. before the Madras High Court by way of a writ petition (WP no. 11991 of 2014) and that the Madras High Court had vide its order dated 25th April 2014 granted interim stay of the Circular. 3. The CIT(A) further erred in not appreciating that tax was not deducted at source by the Appellant on t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....recoveries from its employees during the pendency of the petition. 8 Without prejudice to above grounds, the CIT(A) erred in not holding that the Appellant could not have been deemed to be an assessee in default under section. 201(1) of the Act if the employee had furnished the return of income, taken into account such sum for computing income and paid the tax due on income declared by the employee. The appellant craves leave to add, amend, alter or delete and/or modify the above grounds of appeal before or during the course of hearing." 4. Briefly, the facts of the case are that the appellant is a Branch of Public Sector Bank. The DCIT, TDS, Coimbatore (hereinafter called "TDS Officer) had called upon the appellant bank vide notice dated 20.07.2023, 11.10.2023, 01.11.2023 to furnish the details of Leave Fair Concession(LFC) claimed by the appellant bank during the previous year relevant to assessment year 2017-18. On examination of those details the TDS Officer found that the appellant bank had reimbursed his employees Leave Fair Concession involving foreign travel to its employees. He was of the opinion that reimbursement of Leave Fair Concession involving th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er there was obligation on the part of the appellant bank to deduct Tax in respect of reimbursement of Leave Fair Concession to its employees involving foreign travel. There is no dispute about the fact that subsequently, the Hon'ble Supreme Court in assessee's own case 144 taxmann.com 131(supra) held that such payments are not exempt from tax u/s. 10(5) of the Act. However, during the relevant period, there is a binding judgment of Hon'ble High Court of Madras, wherein, the Hon'ble High Court clearly directed the appellant bank not to recover TDS from employees on such payments. Subsequently, even though the Hon'ble Apex Court stayed the judgment of Hon'ble High Court of Madras, however, specifically directed the appellant bank not to recover the money from its employees. Thus, it is very clear that the appellant bank was not bound to deduct TDS on such payments during the during the previous year relevant to assessment year under consideration. In terms of provisions of section 192, an employer is liable to deduct tax at source based on the bonafide estimate of the total income of the employees. There was no obligation to deduct tax at source by virtue of decision of the Hon'ble ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....orts (P.) Ltd. v. C.G. Suryakant [1995] 129 CTR 317/215 ITR 618/[1996] 85 Taxman 475 (Madras), wherein a more or less similar issue arose for consideration. In that case, the appellants were the tenants of the premises concerned in the appeal. The appellants were found guilty of contempt of court for having wilfully disobeyed certain orders of the Court in an appeal filed against the order of the learned Single Judge. In the contempt appeal, the enforcement of the order was postponed in view of the undertaking made by the appellants to pay a certain sum of rupees ten lakhs on or before 01.08.1994. The amount of rupees ten lakhs was paid on 01.08.1994. The Division Bench recorded the payment of rupees ten lakhs on the previous day and permitted the appellants to make a deposit of rupees three lakhs in the manner stated thereunder. After payments were made as above, a notice was issued by the income tax department to the appellant in the contempt appeal, inviting attention to the provisions of Section 194-I of the Act introduced in June 1994, as per which 20% ought to have been deducted when rent exceeding Rs. 1,20,000/- was paid in a financial year. The appellant in such circumstanc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lant, having complied with the orders of the Madras High Court, cannot be treated as an 'assessee in default' under the provisions of Section 201 of the Act. 12. The Apex Court in State of U.P. v. Prem Chopra [2022] 2 SCR 990, considering the effect of an interim order granted by the Court, once the main matter itself is disposed of, has observed as under:- "24. From the above discussion, it is clear that imposition of a stay on the operation of an order means that the order which has been stayed would not be operative from the date of passing of the stay order. However, it does not mean that the stayed order is wiped out from the existence, unless it is quashed. Once the proceedings, wherein a stay was granted, are dismissed, any interim order granted earlier merges with the final order. In other words, the interim order comes to an end with the dismissal of the proceedings. In such a situation, it is the duty of the Court to put the parties in the same position they would have been but for the interim order of the court, unless the order granting interim stay or final order dismissing the proceedings specifies otherwise. On the dismissal of the proceedin....