THE CHIEF MANAGER (ADMINISTRATION) STATE BANK OF INDIA, REGIONAL BUSINESS OFFICE,JHANSI V. ADDITIONAL CIT (TDS), KANPUR

ITA 382/AGR/2024

AI Insights

The case involves the State Bank of India appealing against penalties imposed for short deduction of TDS on LFC reimbursements to employees for the assessment years 2012-13 and 2013-14. The bank argued that the reimbursements were exempt from TDS under Section 10(5) of the Income Tax Act, as the ultimate destination of the journeys was within India, despite some legs of the journeys being international. The Commissioner of Income Tax (Appeals) upheld the penalties, which the bank contested in the Tribunal. The Tribunal found that the issue was debatable and had been previously supported by an interim order from the Madras High Court, leading to the decision to delete the penalties.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 25778 (ITAT-AGRA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Other Referred Cases: Pricewaterhouse Coopers P. Ltd vs. Income Tax Department, Hon'ble Supreme Court case reported as 144 Taxmann.com 131
• Laws Referred To: Section 271C, Section 201(1), Section 201(1A), Section 10(5)
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHAILENDRA SHRIVASTAVA LD.
• Assessee Lawyers: DEEPAK MAHESHWARI LD
• Keywords: TDS
• Section: 13; 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 1. आयकरअपील सं. / ITA No.382/Agr/2024 (िनधाŊरणवषŊ / Assessment Year: 2012-13) & 2. आयकरअपील सं. / ITA No.383/Agr/2024 (िनधाŊरणवषŊ / Assessment Year: 2013-14) The Chief Manager (Admin) State Bank of India (RBO) 327/44, Gwalior Road, Civil Lines Jhansi – 284 001 बनाम/ Vs. Addl. CIT (TDS) Kanpur ̾थायीलेखासं./जीआइआरसं./TAN No. AGRS-14799-B (अपीलाथŎ/Appellant) : (ŮȑथŎ / Respondent) अपीलाथŎकीओरसे/ Appellant by : Shri Deepak Maheshwari (Advocate) – Ld. AR ŮȑथŎकीओरसे/Respondent by : Shri Shailendra Shrivastava – Ld. Sr. DR सुनवाईकीतारीख/Date of Hearing : 11-02-2025 घोषणाकीतारीख /Date of Pronouncement : 28-03-2025 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeals by assessee for Assessment Years (AY) 2012- 13 & 2013-14 assails imposition of penalty u/s 271C for want of short deduction of tax on LFC reimbursements to its employees. Having heard rival submissions and upon perusal of case records, the appeals are disposed-off as under. First, we take up appeal for AY 2012-13 which arises out of an order of learned Commissioner of Income Tax (Appeals), 2 National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] dated 01-08- 2024 confirming levy of penalty u/s 271C for Rs.1.67 Lacs. 2. It emerges that impugned penalty has been levied for short deduction of tax at source on payment of Leave Fare Concession (LFC) journey to overseas destination as claimed by various employees. An order was passed u/s 201(1) / 201(1A) for short deduction of tax at source raising demand of Rs.3.40 Lacs for short deduction of TDS. As per express provisions of Sec.10(5), the exemption could be granted only for journey to any place in India and there was no intention to allow the employees to travel abroad under the garb of benefit available u/s 10(5). The reimbursement so made by the assessee was not exempt and liable for TDS. Consequently, impugned penalty was levied for Rs.1.67 Lacs u/s 271C for want of any satisfactory explanation from the assessee. 3. During the appellate proceedings, it was submitted that assessee paid LFC / LTA to its employees and LFC was granted for domestic travel. Under the package, the employees visited foreign places en-route to the designated place in India and the assessee employer did not deduct TDS on such reimbursements under a bona-fide belief that such reimbursements were exempt u/s 10(5) which do not require any TDS. No TDS was deducted under bona fide impression that if the destination was in India irrespective of the fact that en-route journey was out of India, the entire reimbursements would be exempt. This belief was supported by interim order dated 16-02-2015 of Hon’ble Madras High Court in MP No.2 of 2-014, WP No. 11991/2014 permitting assessee banker not to deduct TDS on such reimbursements. The assessee bank, following consistent practice, considered LFC claim as exempt and computed tax liability accordingly. The same was under a bona-fide belief that even 3 when the journey involved a foreign leg, the employees would be entitled for exemption of Sec. 10(5) when the designated place was in India. There was no intention / motive either to defy the position of law or to evade any tax. Reference was made to the decision of Hon’ble Supreme Court in the case of Pricewaterhouse Coopers P. Ltd (25 Taxmann.com 400) holding that imposition of penalty was not warranted since the assessee had committed an inadvertent and bona fide error and not intended to conceal its income. However, Ld. CIT(A) rejected the same on the ground that this issue has ultimately been held against the assessee by Hon’ble Supreme Court (reported as 144 Taxmann.com 131) holding that the assessee was required to deduct tax at source on such reimbursements. The Ld. CIT(A) also did not condone the delay of 961 days in the appeal. Aggrieved, the assessee is in further appeal before us. 4. From the facts, it clearly emerges that the assessee, following consistent stand as taken earlier, did not deduct tax at source on impugned reimbursements under a bona-fide belief that irrespective of en-route journeys, when the ultimate destination was in India, such reimbursements would be exempt u/s 10(5). The same is also supported by the fact that the Hon’ble High Court of Madras granted interim order favoring the assessee. Finally, the issue has been put to rest by Hon’ble Apex Court holding that the assessee would be required to deduct TDS on such reimbursements. On these facts, it could very well be said that deduction of TDS on impugned reimbursements was not free from doubt and it was a debatable issue which has ultimately been settled by Hon’ble Apex Court. However, the assessee could not be visited with impugned penalty for short deduction of TDS. The cited case law of 4 Hon’ble Apex Court in the case of Pricewaterhouse Coopers P. Ltd (supra) duly supports the case of the assessee. It was held by Hon’ble court that imposition of penalty was not warranted since the assessee had committed an inadvertent and bona fide error and not intended to conceal its income. Respectfully following the same, we delete the impugned penalty. The Ld. CIT(A), in our opinion, considering the recurring nature of issue, should have condoned the delay considering the fact that the assessee was a public sector undertaking and it would not stand to gain by filing the first appeal with such a delay. In the grounds of appeal, it has already been stated that the assessee was not aware of order dated 26-08-2021 passed u/s 271C. The order was received only on 08-05-2024 upon persistent efforts by the assessee. Considering the possibility of communication gaps at various levels in faceless regime, the delay should have been condoned by Ld. CIT(A). Nevertheless, the impugned penalty stand deleted and the appeal stand allowed. 5. Facts in ITA No.383/Agr/2024 for AY 2013-14 are quite identical and the orders of lower authorities are on similar lines. Facts being pari- materia the same, our adjudication as above shall mutatis mutandis apply to this appeal also. 6. Both the appeals stand allowed. 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 5 Dated: 28-03-2025 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 "