State Bank of India Vs CIT (ITAT Agra)
Summary: The Income Tax Appellate Tribunal, “SMC” Bench, Agra considered an appeal filed by State Bank of India for Assessment Year 2016-17 against demand raised under Sections 201(1) and 201(1A) of the Income-tax Act, 1961 for non-deduction of tax at source on Leave Travel Concession/Leave Fare Concession (LTC/LFC) payments involving foreign travel.
The Assessing Officer had passed an order dated 31 March 2023 treating the assessee as an assessee-in-default and raising demand of approximately Rs. 4.05 lakh, including applicable interest. The CIT(A) subsequently confirmed the demand by order dated 30 September 2024. At the hearing before the Tribunal, none appeared for the assessee, while the Departmental Representative supported dismissal of the appeal, relying upon the decision of the Supreme Court in the assessee’s own case.
The dispute arose from LFC payments made by the assessee-bank to two employees involving a foreign leg, aggregating to Rs. 7.06 lakh. The Assessing Officer held that the payments were not exempt under Section 10(5) of the Income-tax Act. The assessee had contended that tax was not deducted under a bona-fide belief that deduction was not required.
The Tribunal noted that the Supreme Court, in State Bank of India Vs ACIT, Civil Appeal No. 8181 of 2022, dated 4 November 2022, had already concluded the substantive issue concerning exemption under Section 10(5). The Supreme Court held that where the journey of employees involved a foreign leg, the benefit of exemption under Section 10(5) could not be granted. It also held that the employer’s obligation to deduct tax was distinct from the employee’s payment of tax and that, where relevant travel details were available to the employer, the plea of bona-fide mistake could not be accepted.
