TaxTMI 
TaxTMI 
2026 (9) TMI 851
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....ollowing 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/centres 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....
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....n 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." 2. Brief facts of the case are that the appellant-assessee is a branch of State Bank of India. The Assessing Officer, ITO (TDS), Circle 2(2), (hereinafter referred to as "the AO"), passed an order under Section 201/201(1A) for AY 2016-17 on 22-03-2023. The Assessing Officer noted that a similar order was passed by his predecessor for non-deduction of TDS on reimbursement of Leave Travel Concession (LTC).The Hon'ble Supreme Court, in State Bank of India vs. ACIT, in Civil Appeal No. 8181 of 2014, dated 04-11-2022, dismissed the appeal of the State Bank of India and the stand of the revenue/ AO was upheld. On the basis of such primary observation, the AO also issued a show-cause notice under Section 201/201(1A) on 04-01-2023. In the show-cause notice, the assessee was required to furnish details of copies of Form 16 of employees/ officers of Bank, copies of b....
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....ucted tax at source on reimbursement of LFC amount on account of specific directions of the Hon'ble High Court of Madras in its order dated 16-02-2015 in Writ Petition No. 11991 of 2014. In the said order, the Hon'ble High Court held that the amount of LFC paid to an employee would not amount to income for the purpose of TDS. It was directed that if the writ petition is dismissed, the employees would be liable to pay tax on the amount of LFC paid by the Bank. In view of the order of the Hon'ble High Court, the Bank has not deducted tax at source on reimbursement of LFC amount. Non-deduction of tax due to the High Court order. The question of invoking the provisions of Section 201(1) read with Section 201(1A) and treating the assessee in default does not arise. The assessee also referred to the contents of the order of the Madras High Court. In addition to, the assessee also filed detailed written submissions. The submissions of the assessee are reproduced/scanned on pages 7 to 17 of the order of the learned CIT(A). The assessee, in its written submissions, reiterated its earlier stand, including various statements between the Federation of Banks and associations of various bank emp....
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..... 365/Ahmedabad/2026. Copies of all such decisions have been filed. 6. The learned AR of the assessee also furnished a chronology of the relevant facts about the interim order passed by the Madras High Court in April 2024 and the subsequent final order of the Madras High Court in 2022, as well as the decision of the Hon'ble Apex Court in November 2022. The learned AR of the assessee submits that the assessee Bank was following the binding interim order of the Madras High Court and was under a bona fide belief and, in such circumstances, cannot be treated as an assessee in default. Moreover, on similar issues, there are a series of decisions. The period covered in the appeal relates to the period covered by the interim order of the Madras High Court. 7. On the other hand, the learned Senior DR for the Revenue supported the orders of the lower authorities. The learned Senior DR submits that after the decision of the Hon'ble Apex Court, the assessee Bank cannot take the plea of bona fide belief for non-deduction of tax on reimbursement of LFC. 8. We have considered the rival submissions of both the parties and have gone through the orders of the lower authorities care....
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....y this court is explained to the effect that any amount paid to the petitioner towards LTC or reimbursement of LTC pursuant to the impugned order would not amount to the income so as to enable the bank to deduct tax at source. It is made clear that if the writ petition is dismissed, the employees are liable to pay tax on the amount paid by the bank." The Hon'ble Court thus restrained the assessee bank not to deduct tax at source on such reimbursement. Finally, the decision has been rendered by Hon'ble High Court of Madras in case titled as All India State Bank Officers Association vs. SBI (140 Taxmann.com 221; dt. 14-06-2022) holding that withdrawal of additional facility would not infringe services rights or service conditions of officers of respondent bank and therefore, there was no perversity in respect of decision taken for withdrawal of additional concession granted to officers of respondent bank to travel abroad under LTC. It is thus clear that at the 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....