Where an individual had received travel concession or assistance from his employer for proceeding on leave to any place in India, both for himself and his family, then such concession received by the employee is not taxable in the hands of the employee. Similar exemption is allowed to an employee proceeding to any place in India after retirement of service or after the termination of his service.
The provisions of the Act are in relation to the travel concession/assistance given for proceeding on leave to any place in India and the said concession is thus exempt only where the employee has utilized the travel concession for travel within India. Further under Rule 2B of the Income Tax Rules the condition for allowing exemption under section 10(5) of the Act are laid down.
The conditions are in respect of various modes of transport. However, the basic condition is that the employee is to utilize the travel concession in connection with his proceeding to leave to any place within India, either during the course of employment or even after retirement of service or after termination of service.
Reading of section 10(5) of the Act and Rule 2B of the Rules in conjunction lays down the guidelines for claiming exemption in relations to the travel concession received by an employee from his employer or former employer, for proceeding on leave to any place in India. The person is to undertake the journey to any place in India and thereafter return to the place of employment and is entitled to reimbursement of expenditure on such travel between the place of employment and destination in India.
Rule 2B of the Rules further lays down the conditions that the amount to be allowed as concession is not to exceed the air economy fair of the National Carrier by the shortest route to the destination in India. The said condition in no way provides that the assessee is at liberty to claim exemption out of his total ticket package spent on his overseas travel and part of the journey being within India.
RELEVANT TEXT OF THE ORDER IS AS FOLLOWS:-
These are two appeals filed by the assessee against the order of the Ld. CIT(A)-5, Jaipur dated 11.11.2016 for A.Y. 2013-14 & 2014-15 respectively. The assessee has also filed two stay petitions in respect of demand raised by the Assessing Officer of Rs.7,76,365/- for A.Y. 2013-14 & Rs.12,10,074/- for A.Y. 2014-15. Since common issues are involved in these appeals and stay petitions, the same were heard together and disposed off by this consolidated order. For the purpose of discussion, we take up the appeal for A.Y. 2013-14 wherein the following grounds of appeal have been taken:
“1. The order of the learned CIT, on aspects agitated in this appeal, is bad in law, contrary to the provisions of law and facts of the case and without appreciation of the facts and circumstances of the case in their right perspective.
2. The learned CIT erred in passing an order under section 201(1)/ 201(1A) and in raising demand of Rs.7,76,365/- (i.e. tax of 5,95,675/- and interest of Rs. 1,80,690/-) on the basis that tax was not deducted at source on payment of Leave Travel Concession.
3. The learned CIT erred in not appreciating that the benefit of Leave Travel Concession is available to the Bank’s employee even in cases where the journey undertaken by an employee involves a foreign leg but the employee’s designated place is in India and he actually visits the place as designated.
4. The learned CIT erred in making the following observation, holding as under:
‘I have carefully considered the arguments put forth by the appellant. Regarding the argument of the Assessee that exemption u/s 10(5) is not limited to travel only within India and is applicable to a case involving foreign leg in the tour. It is seen that section 10(5) read with Rule 2B is very clear in intent that the said provisions are applicable in connection with proceeding on leave to any place in India. The appellant has in fact bent the interpretation of the said provisions in such a way which goes totally against the intent and spirit of these provisions. In all the cases involving foreign travel one designated place in India is just covered for name sake, otherwise almost entire journey is foreign travel for all practical purposes. In these circumstances, exemption u/s 10(5) would not be available.”
The above observations are without any basis and are contrary to the facts of the case. The appellant objects to these observations/ conclusions.
5. Without prejudice to the above, the learned CIT erred in not appreciating the bona fide belief of the bank in granting benefit of Leave Travel Concession paid to the Bank’s employees who travelled out of India and held the Bank to be an assessee in default.
6. Without prejudice to the above, the learned CIT erred in not appreciating that the employee is entitled to exemption under section 10(5) to the extent of expenses incurred for travel in India where the employee’s designated place is in India and he actually visits the place as designated even in cases where the journey undertaken by an employee involves a foreign leg.
7. Without prejudice to the above, the learned CIT erred in applying a flat rate of 30% for computation of TDS instead of applying the actual income-tax rate applicable in case of each employee.
8. Without prejudice to the above, the learned CIT erred in computing interest for a period of 35 months (i.e. from 1 April 2011 to 28 February 2014) instead of considering the actual date of payment of the LTC in case of each employee.
9. The learned CIT erred in not appreciating the submissions made by the Bank in the correct perspective.
2. All these grounds primarily relates to the benefit of leave travel concession granted by the assessee bank to its employees and non-deduction of TDS on the payment of leave travel concession by the assessee to its employees and the corresponding interest thereon.
3. Briefly the facts of the case are that the assessee bank provides the benefit of leave travel concession (LTC) to its employees.On 19.02.2014 & 22.03.2014, a spot verification was conducted by the Asst. Commissioner of Income-tax (TDS) Jaipur at the Zonal Office of the bank in Jaipur.In this connection, a show cause notice dated 16.12.2014 and then another show-cause dated 08.01.2015 was served upon the Assessee to provide details of amounts used to travel out of India.In response to the Show Cause Notice, the Bank filed its reply on 02.02.2015 as under:
