State Bank of India Vs ITO (ITAT Ahmedabad)
Summary: ITAT Ahmedabad allowed State Bank of India’s appeals for AY 2016-17 and directed deletion of demands under Sections 201(1) and 201(1A) arising from non-deduction of TDS on Leave Fare Concession (LFC) payments involving a foreign leg. The Tribunal acknowledged that the Supreme Court’s judgment dated 04.11.2022 had settled the substantive issue against SBI by holding that exemption under Section 10(5) is unavailable where an employee’s journey involves foreign travel.
However, the limited issue before the Tribunal was whether SBI could nevertheless be treated as an assessee in default for the relevant period when binding interim directions of the Madras High Court were in operation. Those directions specifically provided that LFC payments would not amount to income enabling deduction of tax at source during pendency of the writ proceedings.
ITAT Ahmedabad held that SBI was duty-bound to comply with those judicial directions and that its obligation under Section 192 could not be considered in isolation from a binding court order. The Tribunal also relied on the coordinate Bench decision in ITA No. 514/Agr/2024 and, more importantly, the Kerala High Court’s decision in ITA No. 45 of 2025 dated 18.11.2025, which held that SBI could not be treated as an assessee in default where it was under an obligation not to deduct tax. Accordingly, the Tribunal held that Section 201(1) was not attracted and consequential interest under Section 201(1A) also could not survive. Both appeals were allowed.
