Foreign LTC TDS Default Sustained; Section 201(1A) Interest Gets Limited Relief: ITAT Chennai

By CA Sandeep Kanoi Income Tax Judiciary October 5, 2026

TaxGuru Citation: 2026 taxguru.in 14717
Case Name: SBI LHO Vs DCIT (TDS) (ITAT Chennai)
Appeal Number: Only available for paid members
Date of Judgement/Order: Only available for paid members
Related Assessment Year: 2016-17
Courts: All ITAT, ITAT Chennai

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SBI LHO Vs DCIT (TDS) (ITAT Chennai)

Summary: ITAT Chennai disposed of 13 connected appeals filed by various branches of State Bank of India for AYs 2016-17 and 2017-18 concerning TDS liability on foreign Leave Travel Concession (LTC/LFC). The Tribunal noted that foreign LTC was not exempt under section 10(5) and was liable to TDS under section 192, the substantive taxability having been settled in favour of the Revenue and confirmed by the Supreme Court. SBI relied upon the Madras High Court’s interim directions restraining deduction/recovery and upon State Bank of India Vs CIT, ITA No. 45 of 2025 (Kerala High Court), which held that SBI could not be treated as an assessee-in-default where judicial directions prevented TDS deduction. The Chennai Bench, however, held that the obligation to deduct tax was distinct from payment or recovery of tax. According to the Tribunal, once a stay was vacated, the statutory obligation revived, and SBI was required to comply with the TDS provisions as settled by the Supreme Court. It particularly noted periods from 24.06.2022 to 08.08.2022 and 08.06.2023 to 28.08.2023 when no active stay prevented deduction. On interest under section 201(1A), the Tribunal held that levy was mandatory but permitted SBI to seek appropriate relief for periods when recovery of TDS was stayed by the High Courts/Supreme Court or where the concerned employee had discharged the liability through self-assessment tax. Consequently, the substantive grounds were dismissed, while the ground concerning section 201(1A) interest was partly allowed for statistical purposes.

Cases Discussed

State Bank of India Vs Assistant Commissioner of Income Tax, Civil Appeal No. 8181 of 2022, judgment dated 04.11.2022, [2022] 144 taxmann.com 131 / 449 ITR 192 / [2023] 290 Taxman 129 (Supreme Court) — Followed on the substantive taxability of foreign-leg LTC. The Tribunal treated the Supreme Court ruling as settling that foreign LTC is taxable and that SBI was required to comply with the TDS obligation.
State Bank of India Vs CIT, ITA No. 45 of 2025, judgment dated 18.11.2025, [2025] 180 taxmann.com 837 (Kerala High Court) — Relied upon by SBI for the proposition that it could not be treated as an assessee-in-default when the Madras High Court’s interim directions prevented deduction of tax at source. The Chennai Bench nevertheless sustained the substantive default by holding that the obligation revived when no operative stay prevented deduction.
Collector, Land Acquisition, Anantnag & Anr. Vs Mst. Katiji & Ors., (1987) 2 SCC 107 / 167 ITR 471 (Supreme Court) — Cited by SBI in the penalty appeals in support of a liberal approach to condonation of delay and adjudication on merits.
All India State Bank Officers Federation & Ors. Vs State Bank of India, W.P. No. 11991 of 2014 (Madras High Court) — The proceedings in which SBI’s circular restricting overseas LTC was challenged. The Tribunal recorded the interim orders dated 25.04.2014 and 16.02.2015, including the direction under which LTC paid/reimbursed was not to be treated as income enabling deduction of tax at source during the operation of the interim protection.

FULL TEXT OF THE ORDER OF ITAT CHENNAI

The below mentioned appeals have been filed by the appellant assessee for A.Y.-2016-17 & 2017-18 contesting the order of Ld. First Appellate Authority indicated Column-E, herein below:-

S. No.	Appeal Nos.	A.Y.s	Appellant	CIT(A) Order Details / Addl. JCIT(A)-2	Respondent
A	B	C	D	E	F
1.	ITA No. 734 / Chny / 2026	2016-17	SBI LHO, Chennai, No.16, Circletophouse, Collegelane, Chennai-600 006. [PAN: AAACS8577K]	DIN & Order No. ITBA / APL / S / 250 / 2025-26 / 1083576259(1) dated 11.12.2025	Deputy Commissioner of Income Tax, TDS Circle-3(1), Chennai.
2.	ITA No. 742 / Chny / 2026	2016-17	SBI, CPPC, Chennai Branch CEN Pension Processing Centre, 2nd Floor, 1124 Kaliamman Koil Street, Virugambakkam, Chennai-600 092. [PAN: AAACS8577K]	DIN & Order No. ITBA / APL / S / 250 / 2025-26 / 1083581342(1) dated 11.12.2025	Income Tax Officer, TDS Ward-3(1), Chennai.
3.	ITA No. 2895 / Chny / 2026	2016-17	SBI SME Palipalayam BR Bypass Road, Pallipalayam, Namakkal, Pallipalayam, Tamil Nadu-638 006. [PAN: AAACS8577K]	DIN & Order No. ITBA / NFAC / S / 250 / 2025-26 / 1087464836(1) dated 17.03.2026	Joint Commissioner of Income Tax TDS, TDS Range, Coimbatore.
4.	ITA No. 1399 / Chny / 2026	2016-17	SBI Chinmaya Nagar, No.5, Sayee Nagar, Chinmaya Nagar, Chennai-600 092. [PAN: AAACS8577K]	DIN & Order No. ITBA / APL / S / 250 / 2025-26 / 1084674703(1) dated 12.01.2026.	Income Tax Officer, TDS Ward-3(1), Chennai.
5.	ITA No. 1400 / Chny / 2026	2016-17	SBI SME Chennai Branch, No.1832 Nd Floorsigappiachi Building, Rukmini Lakshmipathy Road, Egmore, Chennai-600 008. [PAN: AAACS8577K]	DIN & Order No. ITBA / APL / S / 250 / 2025-26 / 1084675158(1) dated 12.01.2026	Income Tax Officer, TDS Ward-3(1), Chennai.
6.	ITA No. 1401 / Chny / 2026	2016-17	State Bank of India Branch SME Overseas, Tiruppur, No.13/13-1, Munsifsrinivasapuram, Uthukuli Road, Tiruppur, Tamil Nadu-641 601. [PAN: AAACS8577K]	DIN & Order No. ITBA / APL / S / 250 / 2025-26 / 1086181970(1) dated 18.02.2026	Deputy Commissioner of Income Tax, TDS Circle Coimbatore.
7.	ITA No. 716 / Chny / 2026	2017-18	Finance BR KRM Plaza Ground Floor No.2, Harrington Road, Chennai-600 031. [PAN: AAACS8577K]	DIN & Order No. ITBA / APL / S / 250 / 2025-26 / 1083576893(1) dated 11.12.2025.	Deputy Commissioner of Income Tax, TDS Circle-3(1) Chennai.
8.	ITA No. 746 / Chny / 2026	2017-18	SBI, CPPC, Chennai Branch CEN Pension Processing Centre, 2nd Floor, 1124 Kaliamman Koil Street, Virugambakkam, Chennai-600 092. [PAN: AAACS8577K]	DIN & Order No. ITBA / APL / S / 250 / 2025-26 / 1083583081(1) dated 11.12.2025	Income Tax Officer, TDS Ward-3(1), Chennai.
9.	ITA No. 3869 / Chny / 2026	2017-18	State Bank of India Branch: Attur, MGP Building, Kamarajanar Road, Attur, Salem, Tamil Nadu-636 102. [PAN: AAACS8577K]	DIN & Order No. ITBA / NFAC / S / 250 / 2024-25 / 1069388994(1) dated 04.10.2024	Joint Commissioner Income Tax TDS, TDS Range, Coimbatore.
10.	ITA No. 3870 / Chny / 2026	2017-18	SBI SMECC No.16, State Bank of India, Whannels Road, Egmore, Chennai-600 008. [PAN: AAACS8577K]	DIN & Order No. ITBA / APL / S / 250 / 2025-26 / 1083580448(1) dated 11.12.2025	Income Tax Officer, TDS Ward-3(1), Chennai.
11.	ITA No. 2894 / Chny / 2026	2017-18	SBI SME Palipalayam BR Bypass Road, Pallipalayam, Namakkal, Pallipalayam, Tamil Nadu-638 006. [PAN: AAACS8577K]	DIN & Order No. ITBA / NFAC / S / 250 / 2025-26 / 1087469726(1) dated 17.03.2026	Joint Commissioner Income Tax TDS, TDS Range, Coimbatore.
12.	ITA No. 1402 / Chny / 2026	2017-18	State Bank of India Branch SME Overseas, Tiruppur, No.13/13-1, Munsifsrinivasapuram, Uthukuli Road, Tiruppur, Tamil Nadu-641 601. [PAN: AAACS8577K]	DIN & Order No. ITBA / APL / S / 250 / 2025-26 / 1086182232(1) dated 18.02.2026	Deputy Commissioner of Income Tax, TDS Circle Coimbatore.
13.	ITA No. 1486 / Chny / 2026	2017-18	State Bank of India Branch: Attur, MGP Building, Kamarajanar Road, Attur, Salem,	DIN & Order No. ITBA / APL / S / 250 / 2025-26 / 1085296545(1) dated 29.01.2026	Income Tax officer, TDS, Salem.

GROUNDS OF APPEAL

ITA No. 734/Chny/2026

1. The Learned Commissioner of Income-tax (Appeals) (“CIT(A)”) erred in confirming the order of the Assessing Officer (“AO”) holding the appellant to be an assessee in default for failing to deduct tax at source under section 192 of the Income-tax Act, 1961 (‘the Act’).

2. The CIT (A) erred in not appreciating that the Appellant had issued e-Circular no. CDO/P&HRD-PM/7/2014-15 dated 15th April 2014 stating that the employees shall not be entitled to visit overseas countries/ centers as part of leave travel concession (“LTC”) which Circular was challenged by the All India State Bank Officers Federation & Ors before the Madras High Court by way of a writ petition (WP no. 11991 of 2014) and that the Madras High Court had vide its order dated 25th April 2014 granted interim stay of the Circular.

3. The CIT (A) further erred in not appreciating that tax was not deducted at source by the Appellant on the LTC paid to its employees during the year under consideration in view of the specific interim directions issued by the Hon’ble Madras High Court in its order dated 16th February 2015 by which the Court held that the LTC paid or reimbursed would not amount to income and that no tax was to be deducted thereon. The CIT (A) ought to have appreciated that if the LTC was not to be treated as income of the employees as per the order of the Hon’ble Madras High Court, the same even otherwise would not require withholding of tax under section 192 of the Act.

4. The CIT (A) further erred in not appreciating that the Madras High Court vide its said order dated 16th February 2015 having directed the Appellant not to deduct at source on LTC had further stated that if the writ petition challenging the Circular was dismissed, the employees would be liable to pay tax on the LTC amount paid by the Appellant and, therefore, the CIT (A) ought to have quashed the order of the AO holding the Appellant to be an assessee in default.

5. The CIT (A) erred in not quashing the order of the AO holding the Appellant to be an assessee in default for the reason that the Appellant, even if it wanted to, could not have deducted tax at source on LTC paid during the year under consideration in view of the orders of the Hon’ble Madras High Court till the time they were in force as acting contrary to the orders of the Hon’ble Court would have amounted to contempt of Court.

6. The CIT (A) erred in not following the judgment of the Hon’ble Kerala High Court in State Bank of India v. CIT (ITA no. 45 of 2025) where the Hon’ble Court after considering the above set of facts held that the Appellant was justified in not deducting tax at source in view of the interim directions issued by the Madras High Court asking the Appellant not to deduct tax at source.

8. Without prejudice to above grounds, the CIT (A) erred in not holding that the Appellant could not have been deemed to be an assessee in default under section 201(1) of the Act if the employee had furnished the return of income, taken into account such sum for computing income and paid the tax due on income declared by the employee.

The appellant craves leave to add, amend, alter or delete and/or modify the above grounds of appeal before or during the course of hearing.

[The substantially identical grounds in the connected section 201 appeals and the separate section 271C penalty grounds continue in the source order.]

ITA NO.742/Chny/2026

1 The Learned Commissioner of Income- tax (Appeals) (“CIT(A)”) erred in confirming the order of the Assessing Officer (“AO”) h olding the appellant to be an assessee in default for failing to deduct tax at source under section 192 of the Income tax Act, 1961 (‘the Act’). 2 The CIT (A) erred in not appreciating that the Appellant had issued e- Circular no. CDO/P&HRD-PM/7/2014-15 dated 15 April 2014 stating that the employees shall not be entitled to visit overseas countries/ centers as part of leave travel concession (“LTC”) which Circular was challenged by the All-India State Bank Officers Federation & Ors. before th e Madras High Court by way of a writ petition (WP no. 11991 of 2014) and that the Madras High Court had vide its order dated 25 April 2014 granted interim stay of the Circular. 3 The CIT (A) further erred in not appreciating that tax was not deducted at source by the

Appellant on the LTC paid to its employees during the year under consideration in view of the specific interim directions issued by the Hon’ble Madras High Court in its order dated 16″ February 2015 by which the Court held that the LTC paid or reimbursed would not amount to income and that no tax was to be deducted thereon. The CIT ( A) ought to have appreciated that if the LTC was not to be treated as income of the employees as per the order of the Hon’ble Madras High Court, the same even otherwise would not require withholding of tax under section 192 of the Act

4 The CIT ( A) further erred in not appreciating that the Madras High Court vide its said order dated 16 February 2015 having directed the Appellant not to deduct at source on LTC had further stated that if the writ petition challenging the Circular was dismissed, the employees would be liable to pay tax on the LTC amount paid by the Appellant and, therefore, the CIT (A) ought to have quashed the order of the AO holding the Appellant to be an asses see in default.

5 The CIT ( A) erred in not quashing the order of the AO holding the Appellant to be an assessee in default for the reason that the Appellant, even if it wanted to, could not have deducted tax at source on LTC paid during the year under consideration in view of the Hon’ble Madras High Court till the time they were in force as acting contrary to the orders of the Hon’ble Court would have amounted to contempt of Court. 6 The CITIA) erred in not following the judgment of the Hon’ble Kerala High Court in State Bank of India v. CIT (ITA no. 45 of 2025) where the Hon’ble Court after considering the above set of facts held that the Appellant was justified in not deducting tax at source in view of the interim directions issued by the Madras High Court asking the Appellant not to deduct tax at source 7. The CIT(A) erred in observing that the legal obligation to deduct tax was reinstated once the interim order passed by the Hon’ble Madras High Court was vacated without appreciating that the order o f the Single Judge of the Hon’ble Madras High Court was challenged before the Division bench and later the Division bench’s order before the Hon’ble Supreme Court and that the Hon’ble Supreme Court in SLP(C) no. 16734 of 2023 has ordered the Appellant bank from not making any recoveries from its employees during the pendency of the petition. Without prejudice to above grounds, the CIT ( A) erred in not holding that the Appellant could not have been deemed to be an assessee in default under section 201(1) of the Act if the employee had furnished the return of income, taken into account such sum for computing income and paid the tax due on income declared by the employee.

The appellant craves leave to add, amend, alter or delete and/or modify the above grounds of appeal before or during the course of hearing.

ITA No.2895/Chny/2026

1. On the facts and in the circumstances of the case and in law, the learned CIT (A) erred in confirming the penalty levied under section 271C of the Income-tax Act, 1961.

2. The learned CIT ( A) failed to appreciate that if a case has strong merits, dismissing it solely due to a delay can cause a “gross miscarriage of justice”.

3. The learned CIT(A) failed to take a adopt a liberal approach for condoning delay to ensure justice, rather than shutting out cases on technical grounds as held by the Hon’ble Supreme Court in Collector, Land Acquisition, Anantnag & Anr. v. Mst. Katiji & Ors., (1987) 2 SCC 107/167 ITR 471 (SC)

4. The learned CIT(A) failed to appreciate that delay norm ally works against the litigant, so deliberate delay should not be readily presumed, on the other hand, condoning delay merely allows the matter to be heard on merits

5. The learned CIT (A) failed to appreciate that the Appellant had acted under and in compliance with the interim directions of the Hon’ble Madras High Court dated 16 February 2015 directing that no tax be deducted at source on LTC paid / reimbursed to employees, and therefore the alleged failure, if any, was fully supported by reasonable ca use within the meaning of section 273B.

6. The learned CIT(A) ought to have held that where the Appellant acted in obedience to a subsisting order of a Constitutional Court, no penalty under section 271C could be levied, since such conduct can never amount to willful neglect, contumacious default, or deliberate defiance of law.

7. The learned CIT(A) failed to appreciate that deduction of tax in breach of the interim directions of the Hon’ble Madras High Court would itself have amounted to disobedience of the Court’s order and could have exposed the Appellant to contempt proceedings; hence, the Appellant had more than sufficient and reasonable cause for not deducting tax.

8. The learned CIT(A) failed to appreciate that the Hon’ble Madras High Court had also clarified that, in the event the writ petition failed, the tax liability would fall upon the employees, thereby reinforcing that the Appellant’s conduct was under judicial sanction and devoid of any revenue-evasive intent.

9. The learned CIT (A) erred in not appreciating that the issue was, in any event, debatable and legally contentious, and therefore penalty under section 271C, being penal in nature, was wholly unsustainable.

10. The learned CIT(A) erred in not following / appreciating the ratio of the judgment of the Hon’ble Kerala High Court in State Bank of India v. CIT (ITA No. 45 of 2025), wherein, on similar facts, the Appellant’s action in not deducting tax at source pursuant to the Madras High Court’s interim directions was held to be justified.

11. The learned CIT ( A) failed to appreciate that section 271C is subject to section 273B and that once reasonable cause is established, no penalty can survive.

12. The Appellant craves leave to add, amend, alter, delete or modify any of the abo ve grounds at the time of hearing.

ITA NO.1399/Chny/2026

1. The Learned Commissioner of Income- tax (Appeals) (“CIT(A)”) erred in confirming the order of the Assessing Officer (“AO”) holding the appellant to be an assessee in default for failing to deduct tax at source under section 192 of the Income-tax Act, 1961 (‘the Act).

2. The CIT ( A) erred in not appreciating that the Appellant had issued e Circular no. CDO/P&HRD-PM/7/2014-15 dated 15th April 2014 stating that the employees shall not be entitled to visit overseas countries/centers as part of leave travel concession (“LTC”) which Circular was challenged by the All-India State Bank Officers Federation & Ors. before the Madras High Court by way of a writ petition (WP no. 11991 of 2014) and that the Madras High Court had vide its order dated 25th April 2014 granted interim stay of the Circular. 3. The CITIA) further erred in not appreciating that tax was not deducted at source by the Appellant on the LTC paid to its employees during the year under consideration in view of the specific interim directions issued by the Hon’ble Madras High Court in its order dated 16th February 2015 by which the Court held that the LTC paid or reimbursed would not amount to income and that no tax was to be deducted thereon. The CIT ( A) ought to have appreciated that if the LTC was not to be treated as income of the employees as per the order of the Hon’ble Madras High Court, the same even otherwise would not require withholding of tax under section 192 of the Act.

4. The CIT ( A) further erred in not appreciating that the Madras High Court vide its said order dated 16th February 2015 having directed the Appellant not to deduct at source on LTC had further stated that if the writ petition challenging the Circular was dismissed, the employees would be liable to pay tax on the LTC amount paid by the Appellant and, therefore, the CIT(A) ought to have quashed the order of the AO holding the Appellant to be an assessee in default.

6. The CIT ( A) erred in not following the judgment of the Hon’ble Kerala High Court in State Bank of India v. CIT (ITA n o. 45 of 2025) where the Hon’ble Court after considering the above set of facts held that the Appellant was justified in not deducting tax at source in view of the interim directions issued by the Madras High Court asking the Appellant not to deduct tax at source.

7. The CIT(A) erred in observing that the legal obligation to deduct tax was reinstated once the interim order passed by the Hon’ble Madras High Court was vacated without appreciating that the order of the Single Judge of the Hon’ble Madras High Court was challenged before the Division bench and later the Division bench’s order before the Hon’ble Supreme Court and that the Hon’ble Supreme Court in SLP(C) no. 16734 of 2023 has ordered the Appellant bank from not making any recoveries from its employees during the pendency of the petition. 8. Without prejudice to above grounds, the CIT (A) erred in not holding that the Appellant could not have been deemed to be an assessee in default under section 201(1) of the Act if the employee had furnished th e return of income, taken into account such sum for computing income and paid the tax due on income declared by the employee.

The appellant craves leave to add, amend, alter or delete and/or modify the above grounds of appeal before or during the course of hearing.

ITA No.1400/Chny/2026

1. The Learned Commissioner of Income- tax (Appeals) (“CIT(A)”) erred in confirming the order of the Assessing Officer (“AO”) holding the appellant to be an assessee in default for failing to deduct tax at source under section 192 of the Income-tax Act, 1961 (‘the Act’).

2. The CIT (A) erred in not appreciating that the Appellant had issued e- Circular no. CDO/P&HRD-PM/7/2014- 15 dated 15th April 2014 stating that the employees shall not be entitled to visit overseas countries/ centers as part of leave travel concession (“LTC”) which Circular was challenged by the All-India State Bank Officers Federation & Ors. before the Madras High Court by way of a writ petition (WP no. 11991 of 2014) and that the Madras High Court had vide its order dated 25th April 2014 granted interim stay of the Circular.

3. The CIT ( A) further erred in not appreciating that tax was not deducted at source by the Appellant on the LTC paid to its employees during the year under consideration in view of the specific interim directions issued by the Hon’ble Madras High Court in its order dated 16th February 2015 by which the Court held that the LTC paid or reimbursed would not amount to income and that no tax was to be deducted thereon. The CIT (A) ought to have appreciated that if the LTC was not to be treated as income of the employees as per the order of the Hon’ble Madras High Court, the same even otherwise would not require withholding of tax under section 192 of the Act.

4. The CIT (A) further erred in not appreciating that the Madras High Court vide its said order dated 16th February 2015 having directed the Appellant not to deduct at source on LTC had further stated that if the writ petition challenging the Circular was dismissed, the employees would be liable to pay tax on the LTC amount paid by the Appellant and, therefore, the CIT ( A) ought to have quashed the order of the AO holding the Appellant to be an assessee in default.

6. The CIT ( A) erred in not following the judgment of the Hon’ble Kerala High Court in State Bank of India v. CIT (ITA no. 45 of 2025) where the Hon’ble Court after considering the above set of facts held that the Appellant was justified in not deducting tax at source in view of the interim directions issued by the Madras High Court asking the Appellant not to deduct tax at source.

8. Without prejudice to above grounds, the CIT ( A) erred in not holding that the Appellant could employee had furnished the return of income, taken into account such sum for computing income and paid the tax due on income declared by the employee. The appellant craves leave to add, amend, alter or delete and/or modify the above grounds of appeal before or during the course of hearing.

ITA No.1401/Chny/2026

1. The Learned Commissioner of Income- tax (Appeals) (“CIT(A)”) erred in confirming the order of the Assessing Officer (“AO”) holding the appellant to be an assessee in default for failing to deduct tax at source under section 192 of the Income-tax Act, 1961 (the Act’).

2. The CIT (A) erred in not appreciating that the Appellant had issued e- Circular no. CDO/P&HRD-PM/7/2014- 15 dated 15th April 2014 stating that the employees shall not be entitled to visit overseas countries/ centers as p art of leave travel concession (“LTC”) which Circular was challenged by the All-India State Bank Officers Federation & Ors. before the Madras High Court by way of a writ petition (WP no. 11991 of 2014) and that the Madras High Court had vide its order dated 25th April 2014 granted interim stay of the Circular.

3. The CIT ( A) further erred in not appreciating that tax was not deducted at source by the Appellant on the LTC paid to its employees during the year under consideration in vi ew of the specific interim directions issued by the Hon’ble Madras High Court in its order dated 16th February 2015 by which the Court held that the LTC paid or reimbursed would not amount to income and that no tax was to be deducted thereon. The CIT (A) ought to have appreciated that if the LTC was not to be treated as income of the employees as per the order of the Hon’ble Madras High Court, the same even otherwise would not require withholding of tax under section 192 of the Act.

4. The CIT (A) further erred in not appreciating that the Madras High Court vide its said order dated 16th February 2015 having directed the Appellant not to deduct at source on LTC had further stated that if the writ petition challenging the Circular was dismissed, the employees would be liable to pay tax on the LTC amount paid by the Appellant and, therefore, the CIT ( A) ought to have quashed the order of the AO holding the Appellant to be an assessee in default.

5. The CIT (A) erred in not quashing the order of the AO holding the Appellant to be an assessee in default for the reason that the Appellant, even if it wanted to, could not have deducted tax at source on LTC paid during the year under consideration in view of the orders of the Hon’ble Madras High Court till the time they were in force a s acting contrary to the orders of the Hon’ble Court would have amounted to contempt of Court.

6. The CIT ( A) erred in not following the judgment of the Hon’ble Kerala High Court in State Bank of India v. CIT (ITA no. 45 of 2025) where the Hon’ble Court after considering the above set of facts held that the Appellant was justified in not deducting tax at source in view of the interim directions issued by the Madras High Court asking the Appellant not to deduct tax at source,

8. Without prejudice to above grounds, the CIT ( A) erred in not holding that the Appellant could not have been deemed to be an assessee in default under section 201(1) of the Act if the employee had furnished the return of income, taken into account such sum for computing income and paid the tax due on income declared by the employee. The appellant craves leave to add, amend, alter or delete and/or modify the above grounds of appeal before or during the course of hearing.

ITA No.716/Chny/2026

1. The Learned Commissioner of Income- tax (Appeals) (“CIT(A)”) erred in confirming the order of the Assessing Officer (“AO”) holding the appellant to be an assessee in default for failing to deduct tax at source under section 192 of the Income-tax Act, 1961 (‘the Act).

2. The CIT (A) erred in not appreciating that the Appellant had issued e- Circular no. CDO/P&HRD-PM/7/2014- 15 dated 15th April 2014 stating that the employees shall not be entitled to visit overseas countries/ centers as part of leave travel concession (“LTC”) which Circular was challenged by the All-India State Bank Officers Federation & Ors. before the Madras High Court by way of a writ petition (WP no. 11991 of 2014) and that the Madras High Court had vide its order dated 25th April 2014 granted interim stay of the Circular.

3. The CIT ( A) further erred in not appreciating that tax was not deducted at source by the Appellant on the LTC paid to its employees during the year under consideration in view of the specific interim directions issue d by the Hon’ble Madras High Court in its order dated 16th February 2015 by which the Court held that the LTC paid or reimbursed would not amount to income and that no tax was to be deducted thereon. The CIT (A) ought to have appreciated that if the LTC was not to be treated as income of the employees as per the order of the Hon’ble Madras High Court, the same even otherwise would not require withholding of tax under section 192 of the Act.

4. The CIT (A) further erred in not appreciating that the Madras High Court vide its said order dated 16th February 2015 having directed the Appellant not to deduct at source on LTC had further stated that if the writ petition challenging the Circular was dismissed, the employees would be liable to pay tax on the LTC amount paid by the Appellant and, therefore, the CIT(A) ought to have quashed the order of the AO holding the Appellant to be an assessee in default.

5. The CIT (A) erred in not quashing the order of the AO holding the Appellant to be an assessee in default for the reason that the Appellant, even if it wanted to, could not have deducted tax at source on LTC paid during the year under consideration in view of the orders of the Hon’ble Madras High Court till the time they were in force as acting contrary to t he orders of the Hon’ble Court would have amounted to contempt of Court.

6. The CIT ( A) erred in not following the judgment of the Hon’ble Kerala High Court in State Bank of India v. CIT (ITA no. 45 of 2025) where the Hon’ble Court after considering the above set of facts held that the Appellant was justified in not deducting tax at source in view of the interim directions issued by the Madras High Court asking the Appellant not to deduct tax at source.

8. Without prejudice to above grounds, the CIT ( A) erred in not holding that the Appellant could not have been deemed to be an assessee in default under section 201(1) of the Act if the employee had furnished the return of income, taken into account such sum for computing income and paid the tax due on income declared by the employee. The appellant craves leave to add, amend, alter or delete and/or modify the above grounds of appeal before or during the course of hearing.

ITA No.746/Chny/2026

1. The Learned Commissioner of Income- tax (Appeals) (“CIT(A)”) erred in confirming the order of the Assessing Officer (“AO”) holding the appellant to be an assessee in default for falling to deduct tax at source under section 192 of the Income-tax Act, 1961 (‘the Act’).

2. The CIT (A) erred in not appreciating that the Appellant had issued e- Circular no. CDO/P&HRD-PM/7/2014- 15 dated 15th April 2014 stating that the employees shall not be entitled to visit overseas countries/ centers as part of leave travel concession (“LTC”) which Circular was challenged by the All-India State Bank Officers Federation & Ors. before the Madras High Court by way of a writ petition (WP no. 11991 of 2014) and that the Madras High Court had vide its order dated 25th April 2014 granted interim stay of the Circular.

3. The CIT ( A) further erred in not appreciating that tax was not deducted at source by the Appellant on the LTC paid to its employees during the year under consideration in view of the specific interim directions issued by the Hon’ble Madras High Court in its order dated 16th February 2015 by which the Court held that the LTC paid or reimbursed would not amount to income and that no tax was to be deducted thereon. The CIT ( A) ought to have appreciated that if the LTC was not to be treated as income of the employees as per the order of the Hon’ble Madras High Court, the same even otherwise would not require withholding of tax under section 192 of the Act.

4. The CIT (A) further erred in not appreciating that the Madras High Court vide Its said order dated 16th February 2015 having directed the Appellant not to deduct at source on LTC had further stated that if the writ petition challenging the Circular was dismissed, the employees would be liable to pay tax on the LTC amount paid by the Appellant and, therefore, the CIT ( A) ought to have quashed the order of the AO holding the Appellant to be an assessee in default.

5. The CIT ( A) erred in not quashing the order of the AO holding the Appellant to be an assessee in default for the reason th at the Appellant, even if it wanted to, could not have deducted tax at source on LTC paid during the year under consideration in view of the orders of the Hon’ble Madras High Court till the time they were in force as acting contrary t o the orders of the Hon’ble Court would have amounted to contempt of Court.

6. The CIT ( A) erred in not following the judgment of the Hon’ble Kerala High Court in State Bank of India v. CIT (ITA no. 45 of 2025) where the Hon’ble Court after considering t he above set of facts held that the Appellant was justified in not deducting tax at source in view of the interim directions issued by the Madras High Court asking the Appellant not to deduct tax at source.

8. Without prejudice to above grounds, the CIT (A) erred in not holding that the appellant could not have been deemed to be an assessee in default under section 201(1) of the Act if the employee had furnished the return of income, taken into account such sum for computing income and paid the tax due on income declared by the employee. The appellant craves leave to add, amend, alter or delete and/or modify the above grounds of appeal before or during the course of hearing.

ITA No.3869/Chny/2026

1. On the facts and in the circumstances of the case and in law, the learned CIT ( A) erred in confirming the penalty levied under section 271C of the Income-tax Act, 1961.

2. The Ld. CIT (A) passed the Order for AY 2016-17 instead of AY 2017- 18 even though the Form 35 clearly shows the FY as 2016-17 (AY 2017-18)

3. The learned CIT ( A) failed to appreciate that the Appellant had acted under and in compliance with the interim directions of the Hon’ble Madras High Court dated 16 February 2015 directing that no tax be deducted at source on LTC paid / reimbursed to employees, and therefore the alleged failure, if any, was fully supported by reasonable cause within the meaning of section 273B.

4. The learned CIT(A) ought to have held that where the Appellant acted in obedience to a subsisting order of a Constitutional Court, no penalty under section 271C could be levied, since such conduct can never amount to willful neglect, contumacious default, or deliberate defiance of law.

5. The learned CIT(A) failed to appreciate that deduction of tax in breach of the interim directions of the Hon’ble Madras High Court would itself have amounted to disobedience of the Court’s order and could have exposed the Appellant to contempt proceedings; hence, the Appellant had more than sufficient and reasonable cause for not deducting tax.

6. The learned CIT(A) failed to appreciate that the Hon’ble Madras High Court an d also clarified that, in the event the writ petition failed, the tax liability would fall upon the employees, thereby reinforcing that the Appellant’s conduct was under judicial sanction and devoid of any revenue-evasive intent.

7. The learned CIT ( A) erred in not appreciating that the issue was, in any event, debatable and legally contentious, and therefore penalty under section 271C, being penal in nature, was wholly unsustainable.

8. The learned CIT(A) erred in not following / appreciating the ratio of the judgment of the Hon’ble Kerala High Court in State Bank of India v. CIT (ITA No. 45 of 2025), wherein, on similar facts, the Appellant’s action in not deducting tax at source pursuant to the Madras High Court’s interim directions was held to be justified.

9. The learned CIT ( A) failed to appreciate that section 271C is subject to section 273B and that once reasonable cause is established, no penalty can survive.

10. The Appellant craves leave to add, amend, alter, delete or modify any of the above grounds at the time of hearing.

ITA No.3870/Chny/2026

2. The CIT (A) erred in not appreciating that the Appellant had issued e-Circular no. CDO/P&HRD-PM/7/2014- 15 dated 15th April 2014 stating that the employees shall not be entitled to visit overseas countries/ centers as part of leave travel concession (“LTC”) which Circular was challenged by the All-India State Bank Officers Fede ration & Ors. before the Madras High Court by way of a writ petition (WP no. 11991 of 2014) and that the Madras High Court had vide its order dated 25th April 2014 granted interim stay of the Circular.

4. The CIT ( A) further erred in not appreciating that the Madras High Court vide its said order dated 16th February 2015 having directed the Appellant not to deduct at source on LTC had further stated that if the writ petition challenging the Circular was dismissed, the employees would be liable to pay tax on the LTC amount paid by the Appellant and, therefore, the CIT (A) ought to have quashed th e order of the AO holding the Appellant to be an assessee in default.

5. The CIT ( A) erred in not following the judgment of the Hon’ble Kerala High Court in State Bank of India v. CIT (ITA no. 45 of 2025) where the Hon’ble Court after considering the above set of facts held that the Appellant was justified in not deducting tax at source in view of the interim directions issued by the Madras High Court asking the Appellant not to deduct tax at source.

6. The CIT(A) erred in observing that the legal obligation to deduct tax was reinstated once the interim order passed by the Hon’ble Madras High Court was vacated without appreciating that the order of the Single Judge of the Hon’ble Madras High Court was challenged before the Division bench and later the Di vision bench’s order before the Hon’ble Supreme Court and that the Hon’ble Supreme Court in SLP(C) no. 16734 of 2023 has ordered the Appellant bank from not making any recoveries from its employees during the pendency of the petition. The appellant craves leave to add, amend, alter or delete and/or modify the above grounds of appeal before or during the course of hearing.

ITA No.2894/Chny/2026

1. On the facts and in the circumstances of the case and in law, the learned CIT (A) er red in confirming the penalty levied under section 271C of the Income-tax Act, 1961.

2. The learned CIT ( A) failed to appreciate that if a case has strong merits, dismissing it solely due to a delay can cause a “gross miscarriage of justice”.

4. The learned CIT

(A) failed to appreciate that delay normally works against the litigant, so deliberate delay should not be readily presumed, on the other hand, condoning delay merely allows the matter to be heard on merits

5. The learned CIT ( A) failed to appreciate that the Appellant had acted under and in compliance with the interim directions of the Hon’ble Madras High Court dated 16 February 2015 directing that no tax be deducted at source on LTC paid / reimbursed to employees, and therefore the alleged failure, if any, was fully supported by reasonable cause within the meaning of section 273B.

7. The learned CIT (A) failed to appreciate that deduction of tax in breach of the interim directions of th e Hon’ble Madras High Court would itself have amounted to disobedience of the Court’s order and could have exposed the Appellant to contempt proceedings; hence, the Appellant had more than sufficient and reasonable cause for not deducting tax.

8. The learned CIT

(A) failed to appreciate that the Hon’ble Madras High Court had also clarified that, in the event the writ petition failed, the tax liability would fall upon the employees, thereby reinforcing that the Appellant’s conduct was under judicial sanction and devoid of any revenue-evasive intent.

9. The learned CIT

(A) erred in not appreciating that the issue was, in any event, debatable and legally contentious, and therefore penalty under section 271C, being penal in nature, was wholly unsustainable.

10. The learned CIT

(A) erred in not following / appreciating the ratio of the judgment of the Hon’ble Kerala High Court in State Bank of India v. CIT (ITA No. 45 of 2025), wherein, on similar facts, the Appellant’s action in not deducting tax at source pursuant to the Madras High Court’s interim directions was held to be justified.

11. The learned CIT

(A) failed to appreciate that section 271C is subject to section 273B and that once reasonable cause is established, no penalty can survive.

12. The Appellant craves leave to add, amend, alter, delete or modify any of the above grounds at the time of hearing.

ITA No.1402/Chny/2026

1. The Learned Commissioner of Income- tax (Appeals) (“CIT(A)”) erred in confirming the order of the Assessing Officer (” AO”) holding the appellant to be an assessee in default for failing to deduct tax at source under section 192 of the Income-tax Act, 1961 (‘the Act’).

2. The CIT (A) erred in not appreciating that the Appellant had issued e-Circular no. CDO/P&HRD-PM/7/2014- entitled to visit overseas countries/ centers as part of leave travel concession (“LTC”) which Circular was challenged by the All-India State Bank Officers Federation & Ors. before the Madras High Court by way of a writ petition (WP no. 11991 of 2014) and that the Madras High Court had vide its order dated 25th April 2014 granted interim stay of the Circular.

3. The CIT (A) further erred in not appreciating that tax was not deducted at source by the Appellant on the LTC paid to its employees during the year under consideration in view of the specific interim directions issued by the Hon’ble Madras High Court in its order dated 16th February 2015 by which the Court held that the LTC paid or reimbursed would not amount to income and that no tax was to be deducted thereon. The CIT ( A) ought to have appreciated that if the LTC was not to be treated as income of the employees as per the order of the Hon’ble Madras High Court, the same even other wise would not require withholding of tax under section 192 of the Act.

4. The CIT ( A) further erred in not appreciating that the Madras High Court vide its said order dated 16th February 2015 having directed the Appellant not to deduct at source on LTC had further stated that if the writ petition challenging the Circular was dismissed, the employees would be liable to pay tax on the LTC amount paid by the Appellant and, therefore, the CIT (A) ought to have quashed the order of the AO holding the Appellant to be an assessee in default.

5. The CIT ( A) erred in not quashing the order of the AO holding the Appellant to be an assessee in default for the reason that the Appellant, even if it wanted to. could not have deducted tax at source on LTC paid during the year under consideration in view of the orders of the Hon’ble Madras High Court till the time they were in force as acting contrary to the orders of the Hon’ble Court would have amounted to contempt of Court.

6. The CIT (A) erred in not following the judgment of the Hon’ble Kerala High Court in State Bank of India v. CIT (ITA no. 45 of 2025) where the Hon’ble Court after considering the above set of facts held that the Appellant was justified in not deducting tax at source in vie w of the interim directions issued by the Madras High Court asking the Appellant not to deduct tax at source.

7. The CIT(A) erred in observing that the legal obligation to deduct tax was reinstated once the interim order passed by the Hon’ble Madras High Court was vacated wit hoot appreciating that the order of the Single Judge of the Hon’ble Madras High Court was challenged before the Division bench and later the Division bench’s order before the Hon’ble Supreme Court and that the Hon’ble Supreme Court in SLP(C) no. 16734 of 2 023 has ordered the Appellant bank from not making any recoveries from its employees during the pendency of the petition.

8. Without prejudice to above grounds, the CIT ( A) erred in not holding that the Appellant could not have been deemed to be an asses see in default under section 201(1) of the Act if the employee had furnished the return of income, taken into account such sum for computing income and paid the tax due on income declared by the employee. The appellant craves leave to add, amend, alter or delete and/or modify the above grounds of appeal before or during the course of hearing.

ITA No.1486/Chny/2026

1. The Learned Commissioner of Income-tax (Appeal) (“CIT(A)”) erred in confirming the order of the Assessing Officer (“AO”) holding the app ellant to be an assessee in default for failing to deduct tax at source under section 192 of the Income-tax Act, 1961 (‘the Act’).

2. The CIT(A) erred in not appreciating that the Appellant had issued e- Circular no CDO/P&HRD-PM/7/2014-15 dated 15th April entitled to visit overseas countries /centers as part of leave travel concession (LTC) which Circular was challenged by the All-India State Bank Officers Federation & Ors. before the Madras High Court by way of a writ petition (WP no. 11991 of 2014) and that the Madras High Court had vide its order dated 25th April 2014 granted interim stay of the Circular. 3. The CIT(A) further erred in not appreciating that tax was not deducted at source by the Appellant on the LTC paid to its employees during the year under consideration in view of the specific interim directions issued by the Hon’ble Madras High Court in its order dated 16th February 2015 by which the Court held that the LTC paid or reimbursed would not amount to income and that no tax was to be deducted thereon The CIT(A) ought to have appreciated that if the LTC was not to be treated as income of the employees as per the order of the Hon’ble Madras High Court, the same even otherwise would not require withholding of tax under section 192 of the Act.

4. The CIT (A) further erred in not appreciating that the Madras High Court vide its s aid order dated 16th February 2015 having directed the Appellant not to deduct at source on LTC had further stated that if the writ petition challenging the Circular was dismissed, the employees would be liable to pay tax on the LTC amount paid by the Appellant and, therefore, the CIT (A) ought to have quashed the order of the AO holding the Appellant to be an assessee i n default.

6. The CIT (A) erred in not following the judgment of the Hon’ ble Kerala High Court in State Bank of India v. CIT (ITA no. 45 of 2025) where the Hon’ble e Court after considering the above set of facts held that the Appellant was justified in not deducting tax at source in view of the interim directions issued by the Madras High Court asking the Appellant not to deduct tax at source.

8. Without prejudice to above grounds, the CIT ( A) erred in not holding that the Appellant could not have been deemed to be an assessee in default under section 201(1) of the Act if the employee had furnished the return of income, taken into account such sum for computing income and paid the tax due on income declared by the employee. The appellant craves leave to add, amend, alter or delete and/or modify the above grounds of appeal before or during the course of hearing.

2. The brief facts of the case are that the assessee appellants are various branches of the State Bank of India (SBI) We have gone through the grounds raised by the assessee branches. The issue under consideration is identical in all the appeals, i.e., taxability of foreign leave travel concession (LTC). It is observed that orders u/s. 201 and 201(1A) of the A mentioned (Supra) by various TDS assessing authorities. In these orders it was held that the amount paid by the employer, i.e., SBI on foreign LTC is not exempt u/s. 10(5) of the Act, hence the same is liable for TDS u/s. 192 of the Act treating it a part of salary only.

3. The appellants mentioned (Supra) being aggrieved with the same preferred an appeal before the Ld. CIT (A)s, who in turn confirmed the orders passed by the TDS assessing authorities and the appeals filed w ere dismissed. The appellants being further aggrieved preferred the present appeals before us. We have gone through the orders of TDS assessing authorities, the orders of Ld. CIT (A)s and submissions of the appellants along with the grounds taken before us. It is observed that the issue involved is identical in all the appeals and the principal issue, i.e., taxability of foreign LTC has already been decided by the Hon’ ble Madras High Court in favour of the Revenue and the same has been confirmed by the Hon’ ble Supreme Court also. But the Hon’ble Supreme Court has stayed the recovery of tax by SBI from its employees.

4. As mentioned, (supra), for the sake of clarity and better appreciation of the matter, we are reproducing herein below the relevant extracts of the orders /events on account of the Hon’ble Jurisdictional High Court and Apex Court orders as under:-

Sequence of events and judgments.

S. No.	Event Date	Event & Impact	Reference	Page Nos.	Submitted to CIT(A)
1.	15.04.2014	Event: SBI issues circular stating that LFC with foreign travel will not be permitted. Impact: Employees cannot travel overseas.	Annexure-1	1	No
2.	25.04.2014	Event: Madras High Court stays SBI Circular. Condition: if the writ petition is dismissed, the LFC amount will be refunded by the employees. Impact: Employees can travel overseas.	Annexure-2	2 to 3	Yes
3.	Nov-2014	SBI started applying TDS provision.			No
4.	16.02.2015	Event: Madras High Court says LFC cannot be treated as income. Condition: if the writ petition is dismissed, the employees are liable to pay tax on the amount paid by the Bank. Impact: SBI had to stop TDS application.	Annexure-3	4 to 6	Yes
5.	24.06.2022	Event: Madras High Court removes the stay on SBI Circular dated 15.04.2014. Impact: SBI circular dt. 15.04.2014 is valid and therefore overseas LFC travel not permitted.	Annexure-4	7 to 28	No
6.	08.08.2022	Event: Madras High Court gives interim relief to SBI Officers. Condition: No recovery shall be affected from their salary and also that no coercive proceedings shall be instituted by any authorities against them during the pendency of the Writ Appeal.			No
7.	04.11.2022	Event: Hon’ble Supreme Court judgment held LFC to be taxable.			No
8.	08.06.2023	Event: Madras High court set aside judgment dated 24.06.2022. Condition: Association and SBI to discuss and settle amicably within 3 months. Impact: Foreign LFC continues.	Annexure-5	29 to 41	No
9.	28.08.2023	Event: SBI approaches Supreme Court who grants a stay on judgment dt. 08.06.2023. Condition: However, the petitioner Bank shall not make any recoveries from its employees during the pendency of the present Writ Petition. Impact: Foreign LFC Stopped.	Annexure-6	42 to 43	Yes
10.	27.02.2024	Event: ITAT Delhi holds SBI in default.			No
11.	11.07.2024	Event: Delhi High Court holds SBI in default.			No
12.	02.12.2024	Event: SBI approaches Supreme Court against ITAT & Delhi High Court order and gets a stay on the ITAT / Delhi High Court Order. Condition: The demand notices issued by the tax department shall remain stayed.	Annexure-7	44 to 45	Yes
13.	18.11.2025	Hon’ble Kerala High Court decision – SBI cannot be treated as assessee in default in view of Madras High Court Judgement.	Annexure-8	46 to 64	No
14.	28.03.2025	Hon’ble ITAT Order in the matter of SBI own case wherein it is held that SBI cannot be treated as assessee in default in view of Madras High Court Judgement.	Annexure-9	65 to 69	No

5. The obligation of deducting tax is distinct from the payment or recovery of tax. Even if recovery proceedings were suspended or the bank was prevented from recovering amounts from employees, the duty to deduct TDS, based on the taxability of the income still exists. As observed above there was no stay from 24.06.2022 to 08.08.2022 and from 08.06.2023 to 28.08.2023, implying that recovery of the whole LTC amount paid became applicable. However, the appellant neither deducted tax on LFC / LTC nor made recovery despite the clear Supreme Court decision in Civil Appeal No.8181 of 2022. The deduction or recovery of the amount was certain following the Supreme Court’s decision. For as soon as the stay is vacated, the legal obligation to deduct tax is reinstated. The deductor was required to comply with the provision of TDS as confirmed by the Hon’ble Supreme Court of India. The stay only provides temporary relief from the obligation. Once the legal position is clarified the obligation to deduct tax and the consequences of the past failure become applicable. The deductor is liable to pay the TDS and interest for all periods where the deduction legally required to be made but not made. While there was no active stay order preventing the deduction, the appellant neither deducted tax on LFC nor made recovery.

6. As regards interest under section 201(1A) of the Income Tax Act, 1961, charging of interest is mandatory and there is no scope of not charging the same. Charging of interest, being consequential in nature, does not require separate adjudication. However, the appellant can file petition for the period when recovery of TDS was stayed by the Hon’ble High Courts and the Hon’ble Supreme Court or where the employee concerned has discharged the liability by paying self-assessment tax. In view of the above facts and observations thereon, the grounds raised by the appellants are dismissed except ground no. 8 relating to interest u/s. 201(1A) of the Act is partly allowed for statistical purposes only.

7. In the result, the appeal of the appellants are dismissed on substantive issue and partly allowed for statistical purposes only on the issue of interest u/s. 201(1A) of the Act.

Order pronounced on the 19th day of August, 2026, in Chennai.