SBI Coimbatore Branch Vs ACIT (ITAT Chennai)
The ITAT Chennai disposed of four appeals filed by the assessee, a branch of the State Bank of India, against separate orders of the Additional/Joint Commissioner of Income Tax (Appeals)-2, Siliguri, concerning Assessment Years 2016-17 and 2017-18. Since the facts and issues were identical, the appeals were heard together and disposed of through a common order. The facts of ITA No.938/CHNY/2026 for AY 2017-18 were taken as representative.
The dispute concerned the assessee bank’s non-deduction of tax at source on Leave Fair Concession (LFC) reimbursements involving foreign travel provided to its employees. The TDS Officer, Coimbatore, issued notices requiring details of LFC claimed by the bank during the relevant previous year. On examination, the officer found that the bank had reimbursed employees for LFC involving foreign travel and took the view that such reimbursement was not eligible for exemption under Section 10(5) of the Income Tax Act, 1961. The bank was consequently called upon to explain why it should not be treated as an “assessee in default” for failure to deduct tax at source.
The bank submitted that it had not deducted TDS on the LFC reimbursements because of interim directions issued by the Madras High Court on 16 February 2015. According to the bank, the Court had directed it not to deduct tax at source on such payments. The TDS Officer, however, relied upon the Supreme Court’s judgment in the bank’s own case, State Bank of India Vs. ACIT [2022] 144 taxmann.com 131 (SC), and held that the bank ought to have deducted TDS under Section 192 because LFC payments involving foreign travel were not exempt under Section 10(5). The TDS Officer accordingly treated the bank as an assessee in default and raised tax and interest demands under Sections 201 and 201(1A). The CIT(A) dismissed the bank’s appeal.
