State Bank of India Vs CIT (Appeals) (ITAT Agra)
The appeal before the Income Tax Appellate Tribunal, Agra Bench, concerned Assessment Year 2016-17 and challenged the demand raised against the assessee under Sections 201(1) and 201(1A) of the Income-tax Act for failure to deduct tax at source on Leave Fare Concession (LFC) reimbursements involving foreign travel.
The Assessing Officer found that the assessee-bank had reimbursed LFC claims amounting to Rs.7.06 lakh to two employees without deducting tax at source. According to the Assessing Officer, the payments were not eligible for exemption under Section 10(5) because the travel involved a foreign leg. Although the bank contended that it had acted under a bona fide belief that no tax was deductible, the Assessing Officer relied upon the Supreme Court’s decision in the assessee’s own case, which held that exemption under Section 10(5) was unavailable where travel was not confined to destinations within India. Consequently, the bank was treated as an assessee-in-default, and a demand of Rs.4.05 lakh, including interest, was raised. The CIT(A) affirmed this demand.
The Tribunal observed that the Supreme Court had conclusively held that LFC reimbursements involving foreign travel did not qualify for exemption under Section 10(5). The Supreme Court had also rejected the plea of bona fide mistake, holding that employers possess complete information regarding employees’ travel plans while processing LTC claims and are under a statutory obligation to deduct tax under Section 192(1).
