TaxTMI 
TaxTMI 
2026 (10) TMI 676
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....ppeal No. Date of Impugned Order 1. 151/Agr/2026 2017-18 Addl/JCIT(A)-2 Siliguri/10057/2016-17 15.01.2026 2. 175/Agr/2026 2017-18 Addl/JCIT(A)-2 Siliguri/10055/2016-17 30.12.2025 3. 265/Agr/2026 2017-18 Addl/JCIT(A)-2 Siliguri/10340/2015-16 27.01.2026 4. 337/Agr/2026 2016-17 Addl/JCIT(A)-2 Siliguri/10084/2014-15 27.01.2026 5. 411/Agr/2026 2017-18 Addl/JCIT(A)-2 Siliguri/10089/2016-17 23.12.2025 6. 420/Agr/2026 2016-17 Addl/JCIT(A)-2 Siliguri/10468/2015-16 18.03.2026 7. 432/Agr/2026 2017-18 Addl/JCIT(A)-2 Siliguri/10343/2015-16 27.01.2026 3. At the very outset, it is worth mentioning that, according to registry's report, ITA Nos. 337, 411 & 432/Agr/2026 have been filed by delay of 15, 67 & 45 days respectively. The reasons mentioned in all the applications for condonation of delay are that, the delay occurred due to bonafide administrative reason i.e. requirement of approvals from the competent authority etc. We treat the cause shown by the assessee bank as sufficient and condone the said delay caused in filing ITA No. 337, 411 & 432/Agr/2026. These time-barred appeals are ....
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....ng ITA Nos. 411,420&432/Agr/2026 are the fresh appeals filed on behalf of the assessee involving same identical issue, hence, these appeals shall also be covered by this common order. 7. We have perused the records. Heard ld representative for the appellant assessee and ld Sr (DR) for the respondent revenue. 8. It is pertinent to mention that the Madras High Court, vide order 25.04.2014, granted an interim stay order until 12.06.2014 in respect of the impugned circular dated 07.04.2014 r/w e-circular dated 15.04.2014 issued by the respondent/State Bank of India, which directed that the officers/ employees shall not be entitled to visit overseas countries/centres as part of LTC/HTC. The conditional interim stay was further extended till the disposal of writ petition vide order dated 16.02.2015 with the direction that if the writ petition is dismissed, the employees shall be liable to pay tax on the amount paid by the bank. The said writ petition was however dismissed on 24.06.2022. This order was challenged before the division bench of the Madras high Court in writ appeal no. 1653/2022 and CMP Nos. 11323 and 23230 of 2022. The DB of Madras High Court, vide order dated 08.06.20....
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.... rival submissions, the written submissions filed by the learned DR, the orders of the authorities below and the decisions placed on record by both sides. The substantive question whether LFC reimbursement involving a foreign leg qualifies for exemption under section 10(5) is no longer open for examination. The Hon'ble Supreme Court, in the assessee's own case, has held that such reimbursement does not qualify for exemption and that tax is deductible under section 192. 63. The controversy before us is, however, narrower. It is whether the assessee can be treated as an assessee in default under sections 201(1) and 201(1A) for not deducting tax from LFC reimbursements during the period when the interim directions dated 16.02.2015 of the Hon'ble Madras High Court were operative. 64. The relevant portion of the interim directions of the Hon'ble Madras High Court, 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....
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.... in obedience to a binding judicial command into a statutory default. The judgment of the Hon'ble Supreme Court determined the taxability of the reimbursement. It did not decide the distinct consequence of a deductor having acted during a later assessment year under an operative judicial direction which expressly restrained deduction. 70. The judgment of the Hon'ble Supreme Court concerned assessment year 2013-14, when the interim direction dated 16.02.2015 was not in existence. The present appeals relate to assessment years 2016-17 and 2017-18. The material distinction is, therefore, not the date on which the Hon'ble Supreme Court pronounced its judgment, but the existence of the specific interim direction governing the conduct of the assessee during the relevant previous years. 71. The learned DR submitted that the assessee was required to establish, payment by payment, that each LFC reimbursement 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....
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....owed by following the earlier Mumbai Bench 19.08.2026 Chennai Bench in ITA No. 734/Chny/2026 and connected appeals 2016-17 and 2017-18 Substantive liability under section 201 sustained. 76. In ITA No. 1832/Mum/2026 and connected appeals, the Coordinate Bench, after considering the earlier decisions and the interim directions of the Hon'ble Madras High Court, recorded the following operative finding: "7. The facts being identical in the present case, respectfully following the above decision of the Coordinate Bench, we hold that the assessee is not in default within the meaning of the provisions of section 201/201(1A), and accordingly, the order passed by the Assessing Officer u/s 201/201(1A) is hereby quashed. 8. In the result, the appeal of the assessee is allowed." 77. Before reaching to such findings the Co-ordinate Bench considered various judicial precedents as - 5. The Ld. Counsel for the assessee further, referring to the decision of the Hon'ble Kerala High Court, which is placed at pages69 to 86 of the paper book, in ITA No.45 of 2025 dated18.11.2025, submitted that recently the Hon'ble Kerala High Court held that the....
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....cers 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 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 impugne....
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....t during the previous years relevant to assessment years 2016-17 and 2017-18, the assessee was governed by the binding directions of the Hon'ble Madras High Court not to recover tax from the employees on such payments. The Bench further observed that, although the Hon'ble Supreme Court subsequently stayed the judgment of the Hon'ble Madras High Court, it specifically directed the assessee-bank not to make recoveries from its employees during the pendency of the proceedings. Considering that the obligation under section 192 was required to be determined at the time of payment on the basis of a bona fide estimate of the employee's income, the Bench held that the subsisting judicial directions precluded the assessee from deducting tax during the relevant period. Following the judgment of the Hon'ble Kerala High Court in the assessee's own case on identical facts, the Bench concluded as under: "10. In view of the above legal position, 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....
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....unal Bench. 83. The first decision relied upon by the learned DR is the order dated 27.06.2025 in ITA No. 1465/Chny/2024. The Chennai Bench sustained the order under sections 201(1) and 201(1A) and observed: "We note the ld. CIT(A) observed that there was no stay from 24.06.2022 to 08.08.2022 and from 08.06.2023 to 28.08.2023 and that the assessee neither deducted tax on LTC nor made recovery, accordingly held the order of the Assessing Officer is correct in holding that the assessee is in default for non-deduction of TDS during 24.06.2022 to 08.08.2022 and from 08.06.2023 to 28.08.2023. We find no infirmity in the order of the ld. CIT(A) as we completely agree with the reasons recorded from paras 5.8 to 5.10 of the impugned order in confirming the order of the Assessing Officer. Thus, the grounds raised by the assessee are dismissed." 84. This decision was pronounced on 27.06.2025. It preceded the judgment of the Hon'ble Kerala 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 ....
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....ITA No. 734/Chny/2026 did not reconcile the contrary superior-court authority or the earlier Co-ordinate Bench decisions rendered on the same issue. 90. Our conclusion does not rest merely upon the numerical preponderance of decisions. It follows from the language of section 201, the precise terms of the interim direction and the chronology of the relevant payments. 91. The substantive taxability of LFC involving a foreign leg stands concluded against the assessee. However, section 201(1) requires a failure by a person who was required to deduct tax. During the relevant previous years, the assessee was expressly directed not to treat the reimbursement as income so as to deduct tax at source. The same order placed the eventual tax liability upon the employees if the writ petition failed. 92. The assessee could not have deducted tax without acting contrary to the judicial direction. The later declaration of substantive taxability did not retrospectively erase the judicial restraint 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 p....