State Bank of India Vs ACIT (TDS) (ITAT Chandigarh)
The appeal before the Income Tax Appellate Tribunal (ITAT), Chandigarh arose from the order of the Commissioner of Income Tax (Appeals), NFAC, dated 11.06.2025 for Assessment Year 2016–17. The assessee challenged the confirmation of penalty amounting to ₹17,23,630 imposed under Section 271C of the Income Tax Act for failure to deduct tax at source (TDS).
The assessee is a banking company responsible for deducting tax at source on salary payments under Section 192 of the Income Tax Act. During TDS verification proceedings, the Assessing Officer issued a notice under Section 133(6) seeking details of Leave Travel Concession/Leave Fare Concession (LTC/LFC) payments made to employees. Upon examining the details, it was found that the assessee had reimbursed LTC/LFC expenses relating to foreign travel undertaken by employees and had not deducted tax at source on these reimbursements.
The Assessing Officer held that exemption under Section 10(5) of the Income Tax Act applies only to travel within India and does not extend to foreign travel. Consequently, the reimbursement of foreign travel expenses constituted taxable salary. The assessee was therefore treated as an assessee in default under Sections 201(1) and 201(1A) for non-deduction of tax at source, resulting in demand of tax and interest. Thereafter, the Additional Commissioner of Income Tax (TDS) initiated penalty proceedings under Section 271C and imposed a penalty equal to the amount of tax not deducted, amounting to ₹17,23,630.
