No Assessee-in-Default Liability for TDS on LTC Reimbursements Paid Under Court Orders: Bangalore ITAT

By CA Vijayakumar Shetty Income Tax Judiciary July 29, 2026

TaxGuru Citation: 2026 taxguru.in 9698
Case Name: State Bank of India Vs ITO (ITAT Bangalore)
Appeal Number: Only available for paid members
Date of Judgement/Order: Only available for paid members
Related Assessment Year: 2017-18
Courts: All ITAT, ITAT Bangalore

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State Bank of India Vs ITO (ITAT Bangalore)

Bangalore ITAT: Employer Not Liable as Assessee-in-Default for Non-Deduction of TDS on LTC Reimbursements Paid Under Binding Court Orders

The Bangalore ITAT held that State Bank of India could not be treated as an assessee-in-default under sections 201(1) and 201(1A) for not deducting TDS on Leave Travel Concession (LTC/LFC) reimbursements paid to employees during AYs 2016-17 and 2017-18. The Tribunal observed that the Bank had acted in compliance with the interim orders of the Madras High Court, which had specifically directed that LTC reimbursements made pursuant to those orders would not constitute income for the purpose of TDS deduction, while leaving the employees liable to pay tax if the writ petition ultimately failed. The Tribunal followed the Kerala High Court’s decision in SBI’s own case, which held that an employer cannot be penalised for obeying a binding judicial order, as non-compliance would have amounted to contempt of court. Accordingly, the Tribunal quashed the orders passed under sections 201(1) and 201(1A), holding that no liability to deduct tax or pay consequential interest could be fastened on the Bank in such circumstances.

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