STATE BANK OF INDIA ,AGRA V. INCOME TAX OFFICER (TDS) -2 , AGRA

ITA 514/AGR/2024

AI Insights

The case involves the State Bank of India appealing against a demand raised by the Income Tax Department for non-deduction of TDS on LFC payments made to employees, which included foreign travel. The primary legal issue was whether the bank was required to deduct TDS on these payments, given an interim order from the Madras High Court restraining such deductions. The Tribunal examined the applicability of section 10(5) of the Income Tax Act and the obligations under section 192(1) concerning TDS deduction. The Tribunal concluded that the bank was not in default as it was following a binding interim court order.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 473707 (ITAT-AGRA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2016-2017
• Other Referred Cases: SBI vs. ACIT, All India State Bank Officers Association vs. SBI
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHAILENDRA SHRIVASTAVA LD.
• Keywords: TDS; Benefit of exemption
• Section: 201(1)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AGRA BEFORE HON’BLE SHRI SATBEER SINGH GODARA, JM AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकरअपील सं. / ITA No.514/Agr/2024 (िनधाŊरणवषŊ / Assessment Year: 2016-17) State Bank of India 59-61/4, SBI Region-5, Sanjay Place Agra – 282002 बनाम/ Vs. CIT (Appeals) Agra ̾थायीलेखासं./जीआइआरसं./TAN No. AGRS-15497-G (अपीलाथŎ/Appellant) : (ŮȑथŎ / Respondent) अपीलाथŎकीओरसे/ Appellant by : None ŮȑथŎकीओरसे/Respondent by : Shri Shailendra Shrivastava – Ld. Sr. DR सुनवाईकीतारीख/Date of Hearing : 19-02-2025 घोषणाकीतारीख /Date of Pronouncement : 28-03-2025 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2016-17 assails demand raised against the assessee u/s 201(1) / 201(1A) of the Act vide order dated 31-03-2023. The first appeal order has been passed by learned Addl. / Joint Commissioner of Income Tax (Appeals), Prayagraj [CIT(A)] on 30-09-2024. At the time of hearing, none appeared for assessee and accordingly, the appeal was heard with the able assistance of Ld. Sr. DR who pleaded for dismissal of the appeal in the light of decision of Hon’ble Apex Court in assessee’s own case. 2. Upon perusal of order passed u/s 201(1)/ 201(1A) by Ld. AO on 31- 03-2023, it could be seen that the assessee reimbursed LTC / LFC 2 payments involving foreign LFC to two of its employees for Rs.7.06 Lacs without deduction of tax at source. The details of the employees have been tabulated at para 6.1 of the order. The Ld. AO held that the said payment was not exempt u/s 10(5) whereas the assessee stated that TDS was not deducted under bona-fide belief that no TDS was required to be deducted against such payments. The Hon’ble High Court of Madras passed an interim order in WP No. 11991/2014 on 16-02-2015 restraining the assessee bank not to deduct TDS on such reimbursements. However, going by the decision of Hon’ble Apex Court in assessee’s own case SBI vs. ACIT (CA No.8181 of 2022 dated 04- 11-2022; 144 Taxmann.com 131) holding that the assessee should have deducted TDS u/s 192(1), Ld. AO held the assessee to be assessee-in-default and raised a demand to Rs.4.05 Lacs for short- deduction of tax at source along with applicable interest. The Ld. CIT(A) confirmed the demand against which the assessee is in further appeal before us. 3. From the facts, it is quite clear that the impugned LFC payments involving foreign LFC are not exempted u/s 10(5) as per the final decision of Hon’ble Apex Court in assessee’s own case (supra). It has been held by Hon’ble Court that the when the assessee-bank claimed exemption towards leave travel concession (LTC) granted to its employees, since travel of said employees was not from one place in India to another place in India but involved a foreign leg, benefit of exemption under section 10(5) could not be granted to assessee. The Hon’ble Court further held that the obligation of deducting tax is distinct from payment of tax. The assessee cannot claim ignorance about the travel plans of its employees as during settlement of LTC Bills the 3 complete facts would be available before the assessee about the details of their employees' travels. Therefore, it cannot be a case of bona fide mistake, as all the relevant facts were before the Assessee employer and he was therefore, fully in a position to calculate the 'estimated income' of its employees. The contention that there may be a bona fide mistake by the assessee-employer in calculating the 'estimated income' cannot be accepted since all the relevant documents and material were before the assessee- employer at the relevant point of time and the assessee employer therefore ought to have applied his mind and deducted tax at source as it was his statutory duty u/s 192(1) of the Act. The issue thus attained finality in favor of the revenue. 4. At the same time, it could be seen that the impugned payments pertain to LFC granted by assessee bank for the period 15-02-2016 to 24-02-2016 when the operation of interim order dated 16-02-2015 of Hon’ble High Court of Madras was in operation, the relevant portion of which read as under: - “6. 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.” 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, 4 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 impugned demand as raised against the assessee stand deleted. 5. The appeal stand allowed in terms of our above order. Order pronounced u/r 34(4) of Income Tax (Appellate Tribunal) Rules, 1963. Sd/- Sd/- (SATBEER SINGH GODARA) (MANOJ KUMAR AGGARWAL) Ɋाियक सद˟ /JUDICIAL MEMBER लेखा सद˟ / ACCOUNTANT MEMBER Dated: 28-03-2025 5 आदेश की Ůितिलिप अŤेिषत / Copy of the Order forwarded to : 1. अपीलाथŎ/Appellant 2. ŮȑथŎ/Respondent 3. आयकरआयुƅ/CIT 4. िवभागीयŮितिनिध/DR 5. गाडŊफाईल/GF ASSISTANT REGISTRAR ITAT AGRA "