State Bank of India Vs ITO (ITAT Ahmedabad)
The Ahmedabad Income Tax Appellate Tribunal (ITAT) allowed appeals filed by State Bank of India against orders passed by the CIT(A) for AY 2016-17 concerning liability under Sections 201(1) and 201(1A) of the Income Tax Act for non-deduction of tax at source on Leave Fare Concession (LFC) payments involving foreign travel.
The assessee-bank had granted LFC benefits to employees and treated such payments as exempt under Section 10(5) while computing TDS under Section 192. During assessment proceedings, the Assessing Officer observed that certain employees had undertaken journeys involving a foreign leg and the bank had not deducted tax at source on such payments. Notices were therefore issued proposing to treat the bank as an assessee in default under Section 201(1) and levy interest under Section 201(1A).
The assessee contended that the LFC benefit was granted in accordance with Section 10(5) and Rule 2B because the designated place of travel was within India and reimbursement was restricted to the shortest route within India. It was also submitted that there was no explicit statutory prohibition against a foreign leg in the course of such travel. The assessee relied on industry practice, Indian Banks’ Association guidelines, judicial precedents, and interim orders of the Madras High Court passed in writ proceedings challenging the bank’s circular restricting overseas travel under LFC.
