Case Law Details
State Bank of India Vs ACIT (Delhi High Court)
The appeal was filed by the State Bank of India against the order dated 09.07.2019 passed by the Income Tax Appellate Tribunal, Delhi Bench ‘G’, in ITA No. 5437/Del/2016 for Assessment Year 2013-14.
Before the Tribunal, the appellant had contended that it was not liable to deduct tax at source on payments made to employees towards Leave Travel Concession (LTC) claims that did not satisfy the prescribed conditions. The appellant also submitted that, having furnished the Permanent Account Number (PAN) details of the employees, the Assessing Officer should proceed against the employees if they had failed to disclose the amounts received as taxable income and had not paid tax thereon.
Read SC Judgment in this case: TDS Liability on Ineligible LTC Claims Upheld; Appeal Dismissed: SC
The Tribunal rejected the appellant’s primary contention. It further held that, for claiming the benefit of the proviso to Section 201(1) of the Income-tax Act, it was the responsibility of the employer, being the deductor, to furnish all necessary particulars before the Assessing Officer. The Tribunal remanded the issue to the Assessing Officer for fresh adjudication after granting an opportunity of hearing to the assessee in light of its observations.
Before the High Court, the appellant submitted that it had deducted tax at source on only that portion of the LTC claims which, according to it, fell outside the LTC scheme. The Court noted that employees had undertaken journeys to destinations in India through foreign countries, including Port Blair via Malaysia and Singapore, Port Blair via Bangkok and Malaysia, Rameswaram via Mauritius, Madurai via Dubai and Thailand, and Port Blair via Europe.
The High Court observed that such journeys did not qualify for LTC claims, as under the LTC scheme the journeys were required to be undertaken within India and by the shortest route. Consequently, the amounts reimbursed to employees towards such LTC claims were not eligible for exemption, and the employer was liable to deduct tax at source on those payments.
The Court held that, since the appellant had deducted tax only on part of the amount based on its own understanding, the finding that it was an assessee in default was justified. It also agreed with the Tribunal that the primary obligation to establish that the recipients had disclosed the LTC amounts as taxable income and paid tax thereon rested upon the employer for availing the benefit of the proviso to Section 201(1). The Tribunal had already afforded the appellant an opportunity to establish its claim before the Assessing Officer.
Holding that no substantial question of law arose for consideration, the High Court dismissed the appeal.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
C.M. No.852/2020 (exemption)
1. Exemption allowed, subject to all just exceptions.
2. The application stands disposed of.
C. M. No.854/2020 (delay)
3. By this application the applicant seeks condonation of delay of 30 days in re-filing the application. For the reasons stated in the application, the delay is condoned.
4. The application stands disposed of in the aforesaid terms.
ITA 5/2020
5. The appellant-State Bank of India has preferred the present appeal to assail the order dated 09.07.2019 passed by the Income Tax Appellate Tribunal (“ITAT”), Delhi Bench ‘G’, New Delhi in ITA No. 5437/De1/2016 in the Assessment Year (AY) 2013-14.
6. The Tribunal has rejected the appellant’s primary submission that it was not liable to deduct tax at source in respect of the payments made by it, to its employees, against Leave Travel Concession (hereinafter referred to as “LTC”) claims, which did not fall within the parameters within which such claims are to be allowed. The Tribunal has also rejected the submission of the appellant that since the appellant had provided PAN details of the employees, the Assessing Officer (hereinafter referred to as “AO”) should proceed against the employees in case they have not disclosed the amounts received by them as their taxable income and have not paid tax thereon. The Tribunal has held that to claim the benefit of the proviso Section 201(1) of the Income Tax Act (“the Act”), it was for the appellant, being the employer and the deductor to furnish all the necessary particulars before the AO. Consequently, the Tribunal has remanded the issue to the file of the AO with the direction to re-adjudicate the said issue afresh after affording an opportunity of being heard to the assessee, in light of its observations made in the impugned order.
7. We have heard the learned counsel for the appellant. Learned counsel for the appellant submits that the appellant had deducted tax at source while making payment of the LTC claims to its employees, in respect of that leg of the journey undertaken by the employee which did not fall within the scheme for grant of LTC. The employees of the appellant had undertaken journeys to the designated places in India via foreign countries. The instances of such travel are tabulated in the tabulation placed on record which shows that travel was undertaken to Port Blair via Malaysia, Singapore, Port Blair via Bangkok, Malaysia, Rameswaram via Mauritius, Madurai via Dubai, Thailand, Port Blair via Europe etc.
8. Obviously, such journeys did not qualify towards LTC claim, since under the LTC scheme, the journeys have to be undertaken within India and by the shortest route. The amounts received by the employees of the appellant-assessee towards reimbursement of LTC claims are therefore not liable to exemption and, consequently, the appellant is liable to deduct tax at source in respect of payments made by it to its employees. Since the appellant had not deducted tax on the entire amount paid and deducted tax only in respect of part of the amount paid as per its own understanding, the finding that the appellant was an assessee in default, in our view, is completely justified. The Tribunal was also correct in its view that it was the primary obligation of the appellant being the deductor, to establish that the recipients had disclosed the amounts received by them towards LTC claims as part of their taxable income and paid tax thereon. The appellant has been afforded the opportunity to make good their claims premised upon the proviso to Section 201(1) of the Act.
9. We are therefore of the view that no substantial question of law arises for consideration.
10. The appeal is dismissed.
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