State Bank of India Vs ITO (ITAT Agra)
In State Bank of India Vs ITO, the Agra ITAT considered whether the assessee bank could be treated as an “assessee in default” under Section 201 of the Income Tax Act for failure to deduct tax at source on Leave Fare Concession (LFC) payments made to employees who undertook foreign travel during their LTC journeys. The Assessing Officer had passed an order under Sections 201(1) and 201(1A) treating the bank as an assessee in default and levying consequential interest.
The Tribunal noted that employees of the bank had availed LFC and travelled to foreign destinations during their journeys. The bank had not deducted TDS on such payments on the ground that the LFC amounts were exempt under Section 10(5) and therefore not taxable in the hands of employees. The bank also argued that even if tax was deductible, employees themselves would discharge the tax liability in their individual returns.
The assessee relied on interim orders of the Madras High Court in proceedings filed by bank officers’ associations, as well as the Kerala High Court judgment in State Bank of India Vs CIT and a decision of the Ahmedabad ITAT in another branch case. In those cases, courts and tribunals had held that the bank could not be treated as an assessee in default because interim judicial directions specifically restrained deduction of TDS on LFC payments during pendency of the litigation.
