State Bank of India Vs CIT (Kerala High Court)
Summary: The Kerala High Court considered ITA No.45 of 2025 filed by State Bank of India against the order dated 09.12.2024 of the Income Tax Appellate Tribunal, Cochin Bench, in ITA No.274 of 2024. The appeal concerned the assessment year 2016-17 and the question whether the assessee-bank could be treated as an assessee in default under Section 201(1) and subjected to interest under Section 201(1A) of the Income-tax Act, 1961 for not deducting tax at source from Leave Travel Concession (LTC) payments made to its employees.
The appellant, a nationalised bank, had been providing reimbursement of LTC to its employees. Pursuant to a circular dated 15.04.2014, the bank withdrew the overseas travel facility under LTC. The circular was challenged before the Madras High Court by the employees’ association. The Madras High Court initially stayed operation of the circular by order dated 25.04.2014 and subsequently issued an interim order dated 16.02.2015 in W.P. No.11991 of 2014 clarifying the effect of its earlier order.
The Madras High Court recorded that the bank would be paying LTC amounts pursuant to the interim order and held, at that stage, that there was no taxable income for deduction at source. It further clarified that amounts paid towards LTC or reimbursement of LTC pursuant to the impugned order would not amount to income so as to enable the bank to deduct tax at source. The order also made it clear that if the writ petition were dismissed, the employees would be liable to pay tax on the amount paid by the bank.
