SBI Morena Tiraha Vs ITO (ITAT Agra)
The issue in these appeals before the Income Tax Appellate Tribunal (ITAT), Agra Bench, concerned whether a public sector bank could be treated as an “assessee in default” under Section 201 of the Income-tax Act, 1961, for failure to deduct tax at source under Section 192 on Leave Fare Concession (LFC) payments made to employees who had undertaken journeys involving foreign travel. The consequential liability to interest under Section 201(1A) was also in dispute.
The employees of the bank had availed LFC benefits and travelled to certain foreign countries during their journeys. The bank did not deduct tax at source on the LFC payments, taking the position that the amounts were exempt in the hands of employees and therefore not taxable as salary under Section 192. The bank was aware that some employees had travelled abroad, as such details were available from the settlement of travel bills submitted by employees.
The bank argued that even if tax deduction was required, it could not be treated as an assessee in default because the employees themselves would pay taxes in their individual capacities. The bank also relied on interim orders passed by the Madras High Court in proceedings involving banking officers’ associations. It was contended that these interim directions had clarified that LFC payments would not amount to income warranting tax deduction at source and that, if the writ petition was ultimately dismissed, the employees would themselves become liable to pay tax. The bank further relied upon the Kerala High Court’s decision, which had held that a bank could not be treated as an assessee in default for non-deduction of tax on such LFC payments when acting under judicial directions.
