Case Law Details
State Bank of India Vs ACIT (Supreme Court of India)
Conclusion: Supreme Court dismissed the appeals and have upheld the contentions of the Revenue that TDS shall be deducted by the appellant of its employees while releasing payments to its employees for the Leave Travel Concession (LTC), when the trip has been made to the foreign countries.
Facts: In the said case, the appellant has challenged the judgement dated 13.01.2020 passed by a Division Bench of the Delhi High Court in ITA No. 05/2020 which has dismissed the appeal filed by the appellant and upheld the order passed by the Income Tax Appellate Tribunal (ITAT) dated 09.07.2019, holding the appellant as an assessee in default for the Assessment Year (AY) 2013- 14, for not deducting TDS of its employees. The main question which was to be determined herein was whether the appellant was in default for not deducting tax at source while releasing payments to its employees as Leave Travel Concession (LTC)
LTC is a payment made to an employee which is exempted as ‘income’ and hence under normal circumstances, there should be no question of TDS on this payment. All the same, LTC has to be availed by an employee within certain limitations, prescribed by the law. Firstly, the travel must be done from one designated place in India to another designated place within India. In other words, LTC is not for a foreign travel. Secondly, LTC is given for the shortest route between these two places. Admittedly, the employees of SBI in the present case, had done their travel not just within India but their journey involved a foreign leg as well. It was also not the shortest route, consequently, according to the Revenue this was not a travel from a designated place within India to another designated place in India and thus it was in violation of the statutory provisions and hence the payment made to its employees by the Bank could not be exempted, and the Bank ought to have deducted Tax at source, while making this payment.
The Hon’ble Supreme Court of India considered Section 192 which casts a statutory duty on the employer to deduct Tax at source from the salary of its employee, Section 10(5) of the Income Tax Act, 1961 which exempts payments received as LTC, and it was observed that the proceedings started with a spot verification under Section 133A when it was discerned by the Revenue that some of the employees of the assessee employer had claimed LTC even for their travel to places outside India. These employees, even though, raised a claim of their travel expenses between two points within India but between the two points they had also travelled to a foreign country as well, thus taking a circuitous route for their destination which involved a foreign place. The matter was hence examined by the Assessing Officer who was of the opinion that the amount of money received by an employee as LTC is exempted under Section 10(5) of the Act, however, this exemption cannot be claimed by an employee for travel outside India which has been done in this case and therefore the assessee employer defaulted in not deducting tax at source from this amount claimed by its employees as LTC. There were two violations of the LTC Rules, pointed out by the Assessing Officer that A. The employee did not travel only to a domestic destination but to a foreign country as well and B. The employees had admittedly not taken the shortest possible route between the two destinations thus the Applicant was held to be an assessee in default by the Assessing Officer.
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