TaxTMI 
TaxTMI 
2026 (10) TMI 494
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....ITA No. 8495/Mum/2026 State Bank of India, Zone East, Mumbai, Sbi RACPC Ghatkopar West Branch, State Bank of India, State Bank of India RACPC, Chinchpokli, Versus ITO TDS Ward 2(2)4, Mumbai, State Bank of India, Maharal Versus The Income Tax Office, TDS Ward 2, Thane, State Bank of India Versus Assistant Commissioner of Income Tax TDS, TDS Circle Thane, State Bank of India Centralised Clearing Processing Centre, State Bank of India, Versus Assistant Commissioner of Income Tax TDS, TDS Circle 2(2) Mumbai, State Bank of India Versus Income Tax Officer TDS Ward, TDS Circle 2(2)(4) Mumbai, State Bank of India, Madam Cama Road Br, State Bank of India, Versus The Assistant Commissioner of Income Tax TDS, TDS Circle 2(2) Mumbai, State Bank of India Versus The Assistant Commissioner of Income Tax TDS, TDS Circle 2(2) Thane, State Bank of India Versus The Assistant Commissioner of Income Tax TDS, TDS Circle 2(2) Mumbai, State Bank of India Versus The Assistant Commissioner of Income Tax TDS, TDS Circle Thane, State Bank of India, State Bank of India CAG Versus The Additional Commissioner of Income Tax, TDS, TDS Circle 2(2), Mumbai, State Bank of India, State Bank of India Trade Finance C....
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....1,173/- ITA 1388/Mum/2026 2016-17 MUMS38670C 22.03.2023 Addl./JCIT(A)-3, Hyderabad, 10.12.2025 Rs. 4,45,833/- ITA 1423/Mum/2026 2016-17 MUMS77235E 20.03.2023 Addl./JCIT(A)-3, Hyderabad, 11.12.2025 Rs. 4,02,542/- ITA 1424/Mum/2026 2017-18 MUMS77235E 18.03.2024 Addl./JCIT(A)-2, Siliguri, 11.12.2025 Rs. 1,13,266/- ITA 1763/Mum/2026 2017-18 MUMS73688G 30.03.2024 Addl./JCIT(A)-2, Siliguri, 29.12.2025 Rs. 6,10,295/- ITA 2486/Mum/2026 2017-18 MUMS70316B 27.03.2024 Addl./JCIT(A)-2, Siliguri, 30.12.2025 Rs. 4,23,169/- ITA 5463/Mum/2026 2017-18 MUMS75707C 18.03.2024 Addl./JCIT(A)-2, Siliguri, 09.03.2026 Rs. 8,61,543/- ITA 5546/Mum/2026 2017-18 MUMS80261G 19.03.2024 Addl./JCIT(A)-2, Siliguri, 05.02.2026 Rs. 1,53,609/- ITA 6618/Mum/2026 2017-18 MUMS81940F 29.02.2024 Addl./JCIT(A)-2, Siliguri, 29.12.2025 Rs. 2,90,242/- ITA 7200/Mum/2026 2016-17 MUMS38455E 20.03.2023 Addl./JCIT(A), Prayagraj, 26.12.2023 Rs. 3,76,293/- ITA 7687/Mum/2026 2016-17 PNES36914D 30.03.2023 Addl./JCIT(A)-2, Siliguri, 18.03.2026 Rs. 1,10,483/- ....
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.... 23.03.2026 Rs. 77,302/- ITA 7898/Mum/2026 2016-17 MUMS70707A 24.01.2024 13.12.2024 Rs. 89,688/- ITA 8195/Mum/2026 2016-17 MUMS36576B 28.11.2023 23.03.2026 Rs. 52,363/- ITA 8472/Mum/2026 2016-17 MUMS37163A 28.11.2023 22.04.2025 Rs. 1,04,864/- ITA 8475/Mum/2026 2016-17 MUMS68676G 29.03.2024 29.11.2024 Rs. 1,34,249/- ITA 8476/Mum/2026 2017-18 MUMS81940F 03.03.2025 11.06.2026 Rs. 1,57,740/- ITA 8477/Mum/2026 2017-18 PNES10673F 26.09.2024 08.11.2024 Rs. 64,125/- ITA 8495/Mum/2026 2017-18 PNES10365F 27.09.2024 08.11.2024 Rs. 57,921/- 6. The common factual position emerging from the orders of the lower authorities is that the assessee provided Leave Fare Concession, hereinafter referred to as "LFC", to its employees in accordance with the State Bank of India Officers' Service Rules, 1992. In the cases presently under consideration, the employees had declared or designated a destination situated in India. The journeys undertaken by them, however, included travel through, or a visit to, one or more foreign destinations before reaching or returning from the ....
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....1) and 201(1A), if otherwise found sustainable, was required to be determined by applying the actual rate of tax applicable to each concerned employee. It was contended that a uniform rate of 30 per cent could not be applied without examining the taxable income, applicable slab rate and tax already paid by the individual employee. 13. The Assessing Officers did not accept the explanation of the assessee. They held that the exemption under section 10(5) was confined to travel within India and that a journey involving a foreign leg fell outside the statutory exemption. The respective demands under sections 201(1) and 201(1A) were accordingly raised. 14. Consequent to the orders passed under sections 201(1) and 201(1A), the respective authorities-initiated penalty proceedings under section 271C. The penalties were quantified with reference to the amount of tax which, according to the authorities, the assessee had failed to deduct under section 192. 15. In response to the penalty notices, the assessee reiterated that the non-deduction of tax was founded upon a bona fide interpretation of section 10(5) read with Rule 2B and the interim directions of the Hon'ble Madras High Cour....
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....A.Y. as per ITA list / impugned order Nature of proceeding AO order First appeal filed ITA 1387/Mum/2026 2017-18 Sections 201(1)/201(1A) 11.01.2024 13.11.2024 ITA 1763/Mum/2026 2017-18 Sections 201(1)/201(1A) 30.03.2024 19.11.2024 ITA 2486/Mum/2026 2017-18 Sections 201(1)/201(1A) 27.03.2024 03.10.2024 ITA 5903/Mum/2026 2017-18 Section 271C 03.03.2025 09.05.2025 ITA 5956/Mum/2026 2017-18 Section 271C 03.03.2025 08.04.2025 ITA 5957/Mum/2026 2017-18 Section 271C 03.03.2025 22.04.2025 ITA 6618/Mum/2026 2017-18 Sections 201(1)/201(1A) 29.02.2024 19.11.2024 ITA 7687/Mum/2026 2016-17 Sections 201(1)/201(1A) 30.03.2023 27.06.2024 ITA 7897/Mum/2026 2016-17 / 2015-16 Sections 201(1)/201(1A) 17.03.2023 23.05.2023 ITA 8196/Mum/2026 2016-17 Sections 201(1)/201(1A) 22.03.2023 04.12.2024 ITA 8373/Mum/2026 2016-17 Sections 201(1)/201(1A) 22.03.2023 19.11.2024 ITA 8474/Mum/2026 2016-17 / 2015-16 Sections 201(1)/201(1A) 22.03.2023 25.05.2023 ITA 8496/Mum/2026 2017-18 Sections 201(1)/201(1A) 26.03.2024 ....
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.... ITA list / impugned order Nature of proceeding AO order First appeal filed ITA 1424/Mum/2026 2017-18 Sections 201(1)/201(1A) 18.03.2024 13.02.2025 ITA 5463/Mum/2026 2017-18 Sections 201(1)/201(1A) 18.03.2024 22.04.2024 ITA 5546/Mum/2026 2017-18 Sections 201(1)/201(1A) 19.03.2024 25.04.2024 ITA 7200/Mum/2026 2016-17 Sections 201(1)/201(1A) 20.03.2023 19.04.2023 ITA 7846/Mum/2026 2016-17 / 2015-16 Sections 201(1)/201(1A) 28.03.2023 02.05.2023 ITA 7847/Mum/2026 2017-18 / 2016-17 Sections 201(1)/201(1A) 19.06.2023 15.07.2023 ITA 7848/Mum/2026 2016-17 / 2015-16 Sections 201(1)/201(1A) 22.03.2023 21.04.2023 ITA 7896/Mum/2026 2016-17 Sections 201(1)/201(1A) 22.03.2023 21.04.2023 ITA 8473/Mum/2026 2017-18 / 2016-17 Sections 201(1)/201(1A) 20.06.2023 14.07.2023 22. On the substantive issue, the first appellate authorities proceeded on the basis that the exemption under section 10(5) was confined to travel within India. They held that, once the itinerary included a foreign leg, the journey ceased to qualify as travel within India for the purpose ....
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....levy of interest under section 201(1A), and the imposition of penalty under section 271C. In the appeals where condonation was refused, the assessee has also challenged the rejection of its applications for condonation of delay. 27. The assessee has raised substantially common grounds in the appeals arising from the orders under sections 201(1) and 201(1A). For the sake of convenience, the representative grounds filed in the case of State Bank of India, Ambernath East Branch, TAN MUMS40227F, for assessment year 2017-18, corresponding to ITA No. 1387/Mum/2026, are reproduced as under: 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 eCircular 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 O....
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....order of the Single Judge of the Hon'ble Madras High Court was challenged before the Division bench and later the Division bench's order before the Hon'ble Supreme Court and that the Hon'ble Supreme Court in SLP(C) no. 16734 of 2023 has ordered the Appellant bank from not making any 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. 28. In the appeals arising from penalties imposed under section 271C, the representative grounds filed in the case of State Bank of India, TAN MUMS67371D, for assessment year 2017-18, corresponding to ITA No. 5768/Mum/2026, are reproduced as under: 1. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in c....
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....hat the principal issue arising in the appeals under sections 201(1) and 201(1A) stood squarely covered in favour of the assessee by the following orders of the Co-ordinate Benches of the Tribunal: i. SBI Bullion Branch and connected appeals v. ACIT/ITO (TDS), ITA Nos. 1565, 1566, 1569, 1570, 1572, 1802, 1803 and 1832/Mum/2026, order dated 30.06.2026; and ii. State Bank of India and Others v. ITO/ACIT (TDS), ITA No. 2453/Mum/2026 and connected appeals, order dated 28.07.2026. 30. The learned AR submitted (the assessee also placed on records the written submissions) that the aforesaid orders were rendered in the assessee's own cases for assessment years 201617 and 2017-18 on materially identical facts. It was submitted that the Co-ordinate Benches had taken note of the substantive position that LFC reimbursement involving a foreign leg was not eligible for exemption under section 10(5). However, the issue arising in the proceedings under sections 201(1) and 201(1A) was distinct and confined to whether the assessee could be treated as an assessee in default for not deducting tax during the period when the interim directions of the Hon'ble Madras High Court dated ....
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....d cease to exist. The penalties, being consequential, could not thereafter survive independently. 36. The learned AR, therefore, submitted that upon deletion of the demands raised under sections 201(1) and 201(1A), the corresponding penalties imposed under section 271C were also liable to be deleted. 37. Per contra, the learned Departmental Representative (DR)s relied upon the orders of the authorities below and the following decisions of the Co-ordinate Bench, Chennai: i. State Bank of India v. ITO (TDS), ITA No. 1465/Chny/2024, order dated 27.06.2025; and ii. State Bank of India and connected appeals, ITA No. 734/Chny/2026 and connected appeals, order dated 19.08.2026. 38. In the written submissions, the learned DR noted the contention of the assessee that, during the period when the interim order of the Hon'ble Madras High Court was operative, the assessee was restrained from deducting tax from the LFC reimbursements and, therefore, could not be treated as an assessee in default under section 201. The learned DR also noted the further contention that the subsequent judgment of the Hon'ble Supreme Court, though settling the substantive issue of taxabili....
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....ubsequently declared by the Hon'ble Supreme Court. The interim order might explain why the assessee did not deduct tax, but it could not change the substantive legal position regarding the taxability of the LFC reimbursements. 44. The learned DR further submitted that the liability contemplated under section 201 was fundamentally different from penal liability. Section 201 constituted a statutory mechanism dealing with the consequences of failure to deduct tax which was otherwise required to be deducted. The determination under section 201 did not depend upon proof of mens rea, deliberate default or contumacious conduct. The relevant question was whether tax was required to be deducted under the Act from the payment in question. 45. According to the learned DR, once the Hon'ble Supreme Court had authoritatively determined that LFC involving a foreign leg was not entitled to exemption under section 10(5), the underlying statutory obligation to deduct tax under section 192 stood established. The subsequent declaration of law was, therefore, required to be considered while determining the statutory liability for the relevant assessment years. 46. The learned DR submitted that....
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....e of payment or credit, the nature of the particular LFC reimbursement and the operative terms of the judicial direction applicable on that date. The assessee was required to demonstrate that the payment fell within the operative period of the relevant order, that the payment was covered by the subject matter of that order, that the assessee was specifically bound by the order in respect of that payment and that there was no intervening order modifying, vacating or otherwise affecting the judicial protection. 51. The learned DR submitted that the interim protection could not be construed as creating a substantive exemption from section 10(5). The terms of the interim proceedings themselves contemplated that, if the writ proceedings ultimately failed, the concerned employees would be liable to pay tax. According to the learned DR, this indicated that the interim order governed the position pending adjudication and did not finally determine the availability of the substantive exemption. 52. It was further submitted that the TDS provisions constituted a machinery for timely collection of tax and that section 201 was intended to ensure that the person entrusted with the statutory....
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....termined the substantive law applicable to the LFC reimbursements. Therefore, the question before the Tribunal was the legal consequence under section 201 of the failure to deduct tax from payments subsequently declared to be subject to deduction under section 192. 57. In conclusion, the learned DR submitted that reliance upon the interim order of the Hon'ble Madras High Court could neither constitute a substantive defence to the taxability of the LFC reimbursements nor confer blanket immunity from section 201. The precise terms, duration and applicability of the interim order were required to be examined in relation to the particular payments. The learned DR accordingly prayed that the orders of the respective CIT(A) be upheld and the appeals filed by the assessee be dismissed. 58. In rebuttal, the learned AR submitted that the Revenue had relied upon decisions of the Chennai Benches which took a view adverse to the assessee, without taking note of another decision of a Co-ordinate Bench at Chennai rendered on the same controversy in favour of the assessee. 59. The learned AR placed on record the order in SBI Coimbatore Branch and connected appeals v. ACIT/ITO (TDS), ITA ....
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....ourt, as reproduced in the orders placed before us, reads as under: "The interim order granted by 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." 65. The aforesaid direction did more than merely stay recovery of tax. It expressly regulated the manner in which the assessee was required to treat the LFC reimbursement for the purpose of deduction of tax at source. It directed that the payment would not be treated as income so as to enable the assessee-bank to deduct tax at source. It further provided that, if the writ petition ultimately failed, the liability to pay tax would rest upon the concerned employees. 66. We agree with the learned DR that an interim judicial order does not amend section 10(5) or create a substantive statutory exemption. The LFC reimbursements involving a foreign leg continued to possess the substantive character subsequently declared by the Hon'bl....
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....ment fell within the scope and operative period of the interim order. In principle, there can be no dispute with this proposition. Judicial protection can operate only to the extent of its terms, duration and subject matter. 72. In the present appeals, however, the Revenue has not identified any particular reimbursement pertaining to assessment years 2016-17 or 2017-18 which was paid outside the operative period of the interim direction dated 16.02.2015. Nor has any intervening order applicable during the relevant previous years been brought to our notice whereby the direction not to deduct tax had been modified or vacated. 73. The Revenue has referred to periods from 24.06.2022 to 08.08.2022 and from 08.06.2023 to 28.08.2023, when, according to it, no active stay operated. Those periods fall several years after the previous years relevant to the present appeals. A temporary cessation or modification of protection in 2022 or 2023 cannot retrospectively create a default in relation to payments made during previous years 2015-16 and 2016-17 when the interim direction dated 16.02.2015 governed the parties. 74. Thus, while we accept the necessity of correlating judicial protec....
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.... Ld. Counsel for the assessee further, referring to the decision of the Hon'ble Kerala High Court, which is placed at pages 69 to 86 of the paper book, in ITA No.45 of 2025 dated 18.11.2025, submitted that recently the Hon'ble Kerala High Court held that the provisions of section 201/201(1A) are not attracted to the facts and circumstances of the assessee's case. Ld. Counsel further stated that the appeal against the decision of the Hon'ble Madras High Court, which granted interim stay, is still pending before the Hon'ble Supreme Court for adjudication. 6. Heard rival contentions and perused the orders of the authorities below. We observe that an identical issue came up for consideration before various Benches of the Tribunal, including the Coordinate Bench of Mumbai in the case of State Bank of India vs. ACIT in ITAs No.2886 and 2887/Mum/2024. The Tribunal, vide order dated 30.05.2025, held that the assessee cannot be treated as an assessee-in-default since the directions issued by the Hon'ble Madras High Court on 16.02.2015 were binding on the assessee during the period under consideration. While holding so, the Coordinate Bench observed as under: "8. We have he....
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....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." 78. The subsequent Co-ordinate Bench in ITA No. 2453/Mum/2026 and connected appeals examined the distinction between the substantive taxability of the LFC reimbursement and the default of the assessee as a deductor. The relevant findings read as under: "32. The fact that the Hon'ble Supreme Court subsequently settled the substantive issue relating to exemption under section 10(5) against the assessee does not alter the position obtaining during the period when the binding interim order governed the parties. The issue of substantive taxability of the reimbursement and the issue whether the assessee could be declared an assessee in default for obeying a subsisting judicial order operate in distinct fields. The subsequent declaration of the correct legal position cannot retrospectively convert an act performed in obedience to a binding judicial direction into a d....
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....n, we are of the considered opinion that the appellant bank cannot be treated as „assessee in default." "13. To sum up, all the four appeals filed by the Assessee are allowed." 80. More importantly, the aforesaid decision followed the judgment of the Hon'ble Kerala High Court in State Bank of India v. CIT, ITA No. 45 of 2025, wherein the effect of the very same interim directions was examined. The relevant findings of the Hon'ble Kerala High Court, as reproduced in the order of Coordinate Bench, read as under: "But in the case at hand, when so visualised, there cannot be any dispute that the appellant-assessee could not have made any deduction in view of the interim order issued as noticed earlier. It is only when the appellant-assessee, after having a liability to deduct tax, fails to do so, the question of invoking Section 201 of the Act and treating it as an „assessee in default‟ arises. Here, the Madras High Court found, prima facie, that the amount paid would not be the income of a payee so as to deduct tax. Therefore, we are of the opinion that the provisions of Section 201(1) of the Act are not attracted to the case at hand. For the sam....
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....erala High Court dated 18.11.2025 and, therefore, did not have the benefit of the later judgment directly deciding the effect of the interim directions upon liability under sections 201(1) and 201(1A). 85. Further, the Chennai Bench relied upon periods in 2022 and 2023 during which the interim protection was considered not to be operative. The appeal before it pertained to assessment year 2015-16, while the present appeals, according to the Tribunal appeal particulars, relate to assessment years 2016-17 and 201718. The cessation of protection during specified periods in 2022 and 2023 does not answer whether the assessee committed a default in relation to payments made in the earlier previous years when the interim direction dated 16.02.2015 was operative. 86. The second decision relied upon by the learned DR is the order dated 19.08.2026 in ITA No. 734/Chny/2026 and connected appeals. The Chennai Bench held: "5. The obligation of deducting tax is distinct from the payment or recovery of tax. Even if recovery proceedings were suspended or the bank was prevented from recovering amounts from employees, the duty to deduct TDS, based on the taxability of the income still ....
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....straint or render the assessee's compliance therewith a default. The statutory obligation to deduct tax had to operate subject to the binding order governing the parties at the time of payment. 93. The Revenue's apprehension that this conclusion would create a substantive exemption is misplaced. We do not hold that the reimbursements were exempt under section 10(5). We hold only that the assessee cannot be treated as an assessee in default under section 201(1) for not deducting tax during the period when it was judicially restrained from doing so. The substantive tax liability of the concerned employees is not the subject matter of these appeals and remains unaffected. 94. Respectfully following the judgment of the Hon'ble Kerala High Court and the Co-ordinate Bench orders in ITA No. 1832/Mum/2026, ITA No. 2453/Mum/2026 and ITA Nos. 938, 939, 940 and 942/Chny/2026, and for the independent reasons recorded above, we hold that the assessee cannot be treated as an assessee in default under section 201(1). Consequently, interest under section 201(1A), being founded upon the default contemplated under section 201(1), cannot survive. 95. The orders passed under sections 201(1) a....
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.... 101. Taking into consideration the institutional explanation, absence of mala fides, commonality of the proceedings and the requirements of substantial justice, we are satisfied that sufficient cause was shown under section 249(3). We accordingly set aside the orders of the CIT(A)/NFAC refusing condonation and condone the delay in the aforesaid 11 appeals. 102. Since the CIT(A)/NFAC has also recorded findings on merits and the issue is a pure legal issue common to all the penalty appeals, no useful purpose would be served by restoring the appeals merely for another adjudication by the first appellate authority. We, therefore, proceed to decide the penalties on merits. 103. Section 271C applies where a person fails to deduct the whole or any part of the tax required under Chapter XVII-B. The provision is expressly subject to section 273B, which provides that no penalty shall be imposable where the assessee proves that there was reasonable cause for the failure. 104. The learned AR submitted that the penalties were consequential and could not survive after the corresponding orders under sections 201(1) and 201(1A) were set aside. The learned DR, on the other hand, correct....