TaxTMI 
TaxTMI 
2026 (8) TMI 760
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....on ("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 withholding of tax under section 192 of the Act. 4. The CIT(A) further erred in not appreciating that the Madras High Court vide its said order dated 16th February 2015 having directed the Appellant not to deduct at source on LTC had further stated that if the writ petition ch....
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....gn Travel. Therefore, proceedings u/s 201(1) of the IT Act was initiated and a letter intending to pass an order u/s 201(1)/ (1A) of the IT Act to determine the liability was issued to the assessee with regard to the employee to whom LFC on foreign tour was granted, however, TDS was not made. The assessee bank furnished information that only one employee Mr. Mahadevo Ganesh Padhye has been paid LFC of Rs. 2,55,772/- involving foreign travel during assessment year 2016-17 on which TDS was not deducted u/s 192(1) of the IT Act. Therefore, a show cause notice was issued to the assessee to furnish his explanation as to why order u/s 201(1)/ (1A) of the IT Act should not be passed in respect of default of non-deduction of TDS on LFC payments made to its employee in connection with foreign travel, however, the assessee did not furnish any reply to the above show cause notice. The Assessing Officer, vide order dated 30.03.2023 treated the assessee as 'an assessee in default' u/s 201(1)/ 201(1A) of the IT Act and determined the TDS liability of Rs. 79,034/- u/s 201(1) of the IT Act along with interest of Rs. 74,292/- u/s 201(1A) of the IT Act. 4. Being aggrieved with the above order dat....
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.... time of impugned payments, the interim order of Hon'ble High Court of Madras was in force which assessee bank was bound to follow. We concur that assessee bank had no option but not to deduct TDS on such reimbursements as per the interim order of Hon'ble Madras High Court. The directions given by the Hon'ble High Court were binding on the assessee and had the assessee deducted tax at source on impugned payment, it would have been contrary to the orders of Hon'ble High Court which could have amounted to contempt of court order. Finally, the decision in the aforesaid case has been rendered by Hon'ble High Court on 14-06-2022. Under these circumstances, we would hold that assessee bank, by interim order of Hon'ble High Court of Madras, 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. We order so. The impugned demand as raised against the assessee stand deleted. 5. The appeal stand allowed in terms of our above order." 7. Respectively following the above decision passed by coordinate bench of this Tribunal in the case of State Bank of Indi....
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.... due on the income declared by him in such return of income, and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed: Provided further that no penalty shall be charged under section 221 from such person, unless the Assessing Officer is satisfied that such person, without good and sufficient reasons, has failed to deduct and pay such tax. (1A) Without prejudice to the provisions of subsection (1), if any such person, principal officer or company as is referred to in that subsection does not deduct the whole or any part of the tax or after deducting fails to pay the tax as required by or under this Act, he or it shall be liable to pay simple interest,-- (i) at one per cent for every month or part of a month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted; and (ii) at one and one-half per cent for every month or part of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid, and such interest shall be paid before furnishing the statement in accor....
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....mstances like the one herein are taken care of, through the first proviso to Section 201 of the Act. 11. We also notice 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 ....
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....made pursuant to the orders issued, as per which there was no scope for tax deduction at source. We are of the opinion that 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 b....