State Bank of India Vs ACIT (ITAT Ahmedabad)
The ITAT Ahmedabad considered an appeal against an order passed by the Commissioner of Income Tax (Appeals) for Assessment Year 2016–17, wherein the Assessing Officer had disallowed exemption under Section 10(5) of the Income Tax Act due to differing interpretation of law and treated the assessee as an “assessee in default” under Sections 201(1) and 201(1A) for non-deduction of tax at source (TDS) on Leave Travel Concession (LTC) payments. The CIT(A) upheld this action.
Before the Tribunal, both parties agreed that the issue was covered by an earlier Tribunal decision in the assessee’s own case. The Tribunal noted that while the Supreme Court had subsequently settled the issue on merits against the assessee regarding exemption under Section 10(5) where foreign travel was involved, the limited question was whether the assessee could be treated as in default for non-deduction of TDS during the relevant period.
The assessee contended that it was bound by interim orders of the Madras High Court, which clarified that LTC payments would not constitute income for the purpose of TDS and directed that if the writ petition was later dismissed, the employees would be liable to pay tax. The Tribunal found merit in this argument, holding that the assessee, being bound by judicial directions, could not have deducted tax without disobeying the court’s order.
