TaxTMI 
TaxTMI 
2026 (8) TMI 692
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....961 ('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 the LTC paid to its employees during the year under consideration in view of the specific interim directions issued by the Hon'ble Madras High Court in its order dated 16th February 2015 by which the Court held that the LTC paid or reimbursed would not amount to income and that no tax was to be deducted thereon. The CIT(A) ought to have appreciated that if the LTC was not to be treated as income of the employees as per the order of the Hon'ble Madras High Court, the same even otherwise would not require withholdi....
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....d bank having TAN CHES302D for the relevant assessment year. The ITO-TDS (the AO) issued notice seeking details of LFC (Leave Fare Concession)/ LTC (Leave Travel Concession), which was claimed as deduction during the assessment year 2016-17 in its P&L account. A show-cause notice was issued to the assessee/deductor why it should not be treated as 'assessee in default' for non-deduction of tax on the said reimbursement of LFC / LTC involving foreign travel to its employees. In response, the assessee filed its letter dated 07.06.2023 contending LFC involving foreign travel to its employees is not chargeable to tax u/s. 10(5) of the Act. Further, it was contended that the assessee's circular issued to its employees stating such LFC / LTC would be liable for TDS was challenged by the employees of the assessee before the Hon'ble Madras High Court and the same was stayed by the Hon'ble High court by writ petition No.11991 of 2014 dated 25.04.2014. However, the AO relied on the Hon'ble Supreme Court judgment in State Bank of India vs. ACIT dated 04.11.2022 (Civil Appeal No.8181 of 2022) and raised a demand u/s. 201 (1) & 201 (1A) of the Act as detailed below:- LFC paid to employee (INR....
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....la). 6. The Ld.DR supported the orders of the AO and the FAA. 7. We have heard rival submissions and perused the material on record. We have heard the rival submissions and perused the material available on record. The short issue for our consideration is whether the assessee-bank could be treated as an assessee in default under sections 201(1) and 201(1A) of the Act for nondeduction of tax at source on Leave Fare Concession (LFC) payments made to its employees during the period when the interim orders of the Hon'ble Madras High Court were in operation. 8. It is an undisputed fact that the assessee was initially under a bona fide belief that reimbursement of Leave Fare Concession involving a foreign stopover was exempt under section 10(5) of the Act. However, upon receipt of notices from the Department and after deliberations with the Indian Banks' Association and the Ministry of Finance, the assessee took a conscious decision to deduct tax at source on such payments and commenced deduction from November, 2014. Thereafter, by interim order dated 16.02.2015 in W.P. No.11991 of 2014, the Hon'ble Madras High Court restrained the assessee from deducting tax at sour....
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....le force in the reliance placed by the learned Authorised Representative on the judgment of the Hon'ble Kerala High Court in State Bank of India v. CIT [2025] 180 taxmann.com 837 (Ker.), wherein, after considering the very same issue, the Hon'ble High Court categorically held that an employer cannot be treated as an assessee in default under section 201(1) when it had acted in obedience to the interim orders of the Hon'ble Madras High Court. The Hon'ble High Court held that the provisions of section 201(1) become applicable only where the deductor, despite being under a legal obligation to deduct tax, fails to do so. In the present case, the interim directions of the Hon'ble Madras High Court governed the field and the assessee was legally justified in not deducting tax at source. Consequently, the provisions of section 201(1A) providing for levy of interest were also held to be inapplicable. The Hon'ble Kerala High Court has further observed that the interim order had specifically cast the ultimate liability upon the employees if the writ petition failed and, therefore, the Department could not, after dismissal of the writ petition, ignore the liability of ....
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....otice the judgment of the Madras High Court in Leema Resorts (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 pai....
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....the same is the position herein also, as the appellant, 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 spec....