State Bank of India Vs ITO (ITAT Ahmedabad)
Summary: The Income Tax Appellate Tribunal, Ahmedabad Bench, considered two appeals filed by State Bank of India, Bhavnagar Para Branch, for Assessment Year 2016-17 against orders of the CIT(A) dated 12.01.2026 and 22.12.2025. The common dispute concerned non-deduction of tax at source on Leave Fare Concession (LFC) provided to employees where the journeys involved a foreign leg.
The assessee had treated the LFC as exempt under section 10(5) while computing TDS under section 192. During assessment proceedings, the Assessing Officer noticed that certain employees had undertaken journeys involving a foreign leg and that tax had not been deducted on the relevant payments. Proceedings were consequently initiated under section 201(1), together with interest under section 201(1A).
The assessee submitted that the LFC benefit was granted in accordance with section 10(5) read with Rule 2B, with the designated place of travel being within India and reimbursement being restricted to the shortest route within India. It also relied upon industry practice, Indian Banks’ Association guidelines, judicial precedents and, importantly, interim orders of the Madras High Court concerning SBI’s circular relating to overseas travel under LTC. According to the assessee, those interim directions operated during the relevant period and prevented the Bank from deducting tax at source.
