State Bank of India Vs CIT (Kerala High Court)
The Kerala High Court, in State Bank of India Vs CIT, allowed the appeal filed by the assessee bank and set aside the orders treating it as an “assessee in default” under Sections 201(1) and 201(1A) of the Income Tax Act, 1961, for the assessment year 2016-17. The dispute arose from the bank’s failure to deduct tax at source (TDS) on Leave Travel Concession (LTC) payments made to employees in relation to overseas travel benefits.
The bank had earlier withdrawn the overseas LTC facility through a circular dated 15.04.2014. This circular was challenged before the Madras High Court by employees’ associations. On 25.04.2014, the Madras High Court stayed the operation of the circular. Subsequently, employees complained that the bank was deducting TDS on LTC payments made pursuant to the interim order. In response, the Madras High Court, by an interim order dated 16.02.2015, clarified that amounts paid towards LTC or reimbursement of LTC pursuant to the interim order would not constitute income enabling the bank to deduct tax at source. The Court further clarified that if the writ petition were ultimately dismissed, the employees themselves would be liable to pay tax on such amounts.
