STATE BANK OF INDIA, POOVAR BRANCH,TRIVANDRUM V. .COMMISSIONER OF INCOME TAX , INCOME TAX CIRCLE TDS, TRIVANDRUM

ITA 274/COCH/2024

AI Insights

The case involves the State Bank of India, Poovar Branch, appealing against the orders of the Assistant Commissioner of Income-tax and the Commissioner of Income-tax (Appeals), which held the bank liable for not deducting TDS on LTC payments to employees for foreign travel. The bank argued that these payments were not taxable under section 10(5) of the Income Tax Act, 1961, based on an interim order from the Madras High Court. However, both the CIT(A) and the tribunal dismissed this argument, citing a Supreme Court judgment that clarified the taxability of such payments. The tribunal emphasized the bank's failure to follow legal procedures in deducting TDS and dismissed the appeal.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 31294 (ITAT-COCHIN)
• Duration Of Justice: 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2024
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2016-2017
• Appeal Filed On: 03-04-2024
• Other Referred Cases: Civil Appeal No.81 of 2022
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: LEENA LAL; SENIOR
• Assessee Lawyers: A. KUMAR
• Keywords: Bonafide belief; TDS
• Section: 201

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN Before Shri Inturi Rama Rao, Accountant Member & Shri Prakash Chand Yadav, Judicial Member ITA No.274/Coch/2024 : Asst.Year 2016-2017 State Bank of India Poovar Branch, Trivandrum – 695 525. PAN : TVDSO1303B. v. The Assistant Commissioner of Income-tax, Trivandrum. (Appellant) (Respondent) Appellant by :Sri.A.Kumar, Advocate Respondent by :Smt.Leena Lal, Senior AR Date of Hearing : 20.11.2024 Date of Pronouncement : 09.12.2024 O R D E R Per Prakash Chand Yadav, JM : The present appeal of the assessee is arising from the order of the learned Commissioner of Income-tax (Appeals) dated 28th December, 2023 and relates to the assessment year 2015-2016. 2. The short facts giving rise to the filing of the present appeal is that the assessee is a Nationalized Bank, made payments to its employees on account of Leave Travel Concession (LTC). Thereafter an information revealing that the assessee has not deducted TDS on the payments made to the employees on account of LTC has come to the knowledge of the department. Accordingly, department initiated proceedings u/s.201(1) and 201(1A) of the Income-tax Act, 1961. During ITA No.274/Coch/2024. State Bank of India, Poovar Branch. 2 the course of proceedings, the Assessing Officer (AO) observed that the assessee has not deducted TDS in respect of the foreign travel of its employees. The AO sought reply of the assessee as to why the assessee is not liable for the interest of sec.201(1) and 201(1A) of the Act. In response, the assessee contended that as per the provisions of sec.10(5) of the Income Tax Act, the payment received by the employee on account of LTC are not taxable in the hands of the employee, and therefore, the payments made were not attracting the TDS provisions. The AO rejected the explanation of the assessee observing that the Hon’ble Supreme Court in its judgment dated 4th November, 2022 in Civil Appeal No.81 of 2022 has held that the moment an employee undertake travel in foreign land then such a journey / travel is not covered by the provisions of section 10(5) of the Act. 3. Aggrieved with the order of the AO, the assessee preferred an appeal before the CIT(A) and inter alia contended that the assessee was under bonafide belief that no TDS is liable to be deducted on the payments made to employees on account of LTC. The learned CIT(A) affirmed the order of the AO and dismissed the appeal of the assessee. 4. Now the assessee has come up in appeal before us. The learned Counsel for the assessee has raised five grounds of appeal, however, the solitary issue which is to be decided here is as to whether the assessee had committed a default in terms of section 201 by not deducting TDS on the payments made to the employees on LTC. The learned Counsel for the assessee ITA No.274/Coch/2024. State Bank of India, Poovar Branch. 3 contended that the RBI has issued a Circular on 7thApril, 2014. By virtue of this Circular, the leave concession facilities to the employees of the bank has been withdrawn by the RBI. The employees of the State Bank of India have challenged the validity of this Circular before the Hon’ble Madras High Court in WP No.1191 of 2014. The learned Counsel for the assessee contended that the Hon’ble Madras High Court vide its judgment dated 25thApril, 2014 has categorically held that in terms of the interim order, the LTC payments were not attracting TDS provisions, and hence, the assessee has not deducted TDS on the payments made to the employees in respect of foreign travel. 5. The learned Departmental Representative appearing on behalf of the Revenue has strongly contended that the dispute now has been settled by the Hon’ble Supreme Court and hence the assessee is correctly treated the assessee in default u/s.201 of the Income-tax Act, 1961. 6. We have heard the rival submissions and perused the material on record. At the outset, we observe that ultimately the Hon’ble Madras High Court has dismissed the WP of the bank employees vide its judgment dated 8th August, 2022 and the Hon’ble Supreme Court had dismissed the appeal of the said bank on 4thNovember, 2022. The contention of the assessee that the there was an interim stay by the Hon’ble Madras High Court and hence the assessee is under Bonafide belief is of no use inasmuch as the interim orders are not the final orders of the proceeding. It is settled position of law that ITA No.274/Coch/2024. State Bank of India, Poovar Branch. 4 interim orders are temporary in nature and have validity till the pendency of the final outcome of the WP / proceedings. It is settled position of law that life of interim order is valid upto a particular date a reference can be made to the provisions of order 39 Rule 1 to 3 to Civil Procedure Code which categorically provides that the life of interim order is valid up to a particular date. Be that as it may, it is an admitted position of fact that the assessee has not approached to the Income Tax Department under the provisions of sec.197 for not deducting TDS on the payments made to the employees. We are dealing with a Nationalized Bank, which banks while opening accounts of poor people, who do not have any PAN, ask them to complete number of formalities. However, while dealing with its own employees the assessee(Bank) is not following the mandatory provisions of law. Therefore, it is not digestive to us as to why the bank has not followed the procedure of law while making the payments to the employee. Therefore, the contention of the assessee that the assessee was under bona-fide belief, has no legs to stand. 7. We observe that the provisions of sec.10(5)(a) have contained the expression “any place in India”. While interpritating this expression, the Hon’ble Supreme Court in Civil Appeal, cited supra, has dismissed the appeal of the State Bank of India. It is also well settled position of law that interpretation of the provisions by Hon’ble Apex Court would be applicable from the date of the birth of such provision and not from the date of its ITA No.274/Coch/2024. State Bank of India, Poovar Branch. 5 interpretation. Therefore, we dismiss the appeal of the assessee. 7. In the result, the appeal filed by the assessee is dismissed. Order pronounced on this 09th day of December, 2024. Sd/- (Inturi Rama Rao) Sd/- (Prakash Chand Yadav) ACCOUNTANT MEMBER JUDICIAL MEMBER Cochin; Dated : 09th December, 2024. Devadas G* Copy to : 1. The Appellant. 2. The Respondent. 3. The CIT, Cochin. 4. The DR, ITAT, Cochin. 5. Guard File. Asst.Registrar/ITAT, Cochin "