A division bench of the Supreme Court headed by Chief Justice Uday Umesh Lalit has delivered a significant ruling against State Bank of India (SBI), that TDS shall be levied on the leave travel allowance for the foreign travel of employees as the Leave Travel Concession ( LTC ) is allowed for the travel within the country only.
The appellant, SBI, a Public Sector Bank, approached the action against the Revenue treating the appellant to be an “assessee in default”, for not deducting the tax at the source of its employees.
A bench of Chief Justice Uday Umesh Lalit, Justice S. Ravindra Bhat, and Justice Sudhanshu Dhulia observed that the provisions of law prescribe that the airfare between the two points, within India, will be given and the LTC which will be given will be of the shortest route between these two places, which have to be within India.
“A conjoint reading of the provisions discussed herein with the facts of this case cannot sustain the argument of the appellant that the travel of its employees was within India and no payments were made for any foreign leg involved,” the Supreme Court held.
Rejecting the arguments raised by the SBI, the Court observed that “We do not want to get into the role of the travel agencies and the present dynamics of airfare, but it is difficult for us to accept that a person will avail foreign tour without paying any price for it. We leave it at that.”
Overruling a contention of SBI that the payments made to these employees were of the shortest route of their actual travel, the Court held that “It has already been clarified above, that in view of the provisions of the Act, the moment employees undertake travel with a foreign leg, it is not a travel within India and hence not covered under the provisions of Section 10(5) of the Income Tax Act.”
Upholding the proceedings against SBI, the Supreme Court held that “The aforementioned order passed by the CIT(A) has rightly held that the obligation of deducting tax is distinct from payment of tax. The appellant cannot claim ignorance about the travel plans of its employees as during the settlement of LTC Bills the complete facts are available before the assessee about the details of their employees’ travels. Therefore, it cannot be a case of bonafide mistake, as all the relevant facts were before the Assessee employer and he was therefore fully in a position to calculate the ‘estimated income’ of its employees. The contention of Shri K.V. Vishwanathan, learned senior advocate that there may be a bonafide mistake by the assessee-employer in calculating the ‘estimated income’ cannot be accepted since all the relevant documents and material were before the assessee-employer at the relevant time and the assessee employer, therefore, ought to have applied his mind and TDS as it was his statutory duty, under Section 192(1) of the Act.”
Subscribe Taxscan Premium to view the Judgment
