Employers, while assessing the conveyance and leave & travel allowance (LTA) claims of their staff, are under no statutory obligation to collect supporting evidence and furnish them to tax authorities, the Supreme Court said on Wednesday. A bench comprising Justice SH Kapadia and Justice Aftab Alam said that assessee employers are under no statutory obligation to collect bills and details to prove that the employees had utilised the amounts obtained against these claims on travel and related expenses. According to prevailing rules, if claims on LTA and conveyance are not supported by journey bills, they would be taxed. For instance, on an LTA allowance of Rs 1 lakh, if documentary proof such as air tickets, taxi vouchers and other public transport bills are submitted only for Rs 50,000, then tax is applicable on the rest of the amount. Regardless of the amount an executive is entitled to as LTA, tax laws allow air tickets only in the domestic sector for the claim. The apex court order came in a plea by companies including Larsen & Toubro and ITI. In its defence, the revenue department had argued that assessee companies were under statutory obligation under Income Tax Act, 1961, and relevant rules, to collect documentary proof to show that their employee(s) had actually utilised the amount paid towards the leave travel concession and conveyance allowance.
Rejecting the plea, the court in its order said: “The beneficiary of exemption under Section 10(5) (of the Income Tax Act) is an individual employee. There is no circular of Central Board of Direct Taxes (CBDT) requiring the employer under Section 192 to collect and examine the supporting evidence to the declaration to be submitted by an employee(s).”
IN THE SUPREME COURT OF INDIA
Civil Appeal No. 993 OF 2005 With Civil Appeal No. 992 OF 2005
COMMISSIONER OF INCOME TAX
Vs
M/s LARSEN & TOUBRO LTD
S H Kapadia And Aftab Alam D.,
Dated: January 21, 2009
JUDGEMENT
A short question which arises for determination in these Civil Appeal(s) is – whether the assessee(s) was under statutory obligation under Income Tax Act, 1961, and/or the Rules to collect evidence to show that its employee(s) had actually utilized the amount(s) paid towards Leave Travel Concession(s)/Conveyance Allowance?
It may be noted that the beneficiary of exemption under Section 10(5) is an individual employee. There is no circular of Central Board of Direct Taxes (CBDT) requiring the employer under Section 192 to collect and examine the supporting evidence to the Declaration to be submitted by an employee(s). For the above reasons there is no merit in the Civil Appeals and the same are dismissed with no order as to costs.
