The Bangalore bench of the Income Tax Appellate Tribunal ( ITAT ), on Friday deleted the penalty proceedings initiated by the tax department against the State bank of India ( SBI ) for not deducting TDS on LTC to its employees on travel outside India stating that there was a reasonable cause on the part of the bank for the non-deduction of tax.
In the year 2017, the ITAT had held that the Leave Travel Concession (LTC) provided to the employees of SBI is not covered under section 10(5) of the Income Tax Act in cases where foreign destination is involved. The bench also held that in such cases, TDS provisions would be applicable on reimbursement of expenditure incurred by the bank.
Following this, the various benches of the Tribunal has pronounced a similar ruling where the levy of the TDS was upheld. However, the Tribunals also dropped the penalty charges finding that the non-deduction was not intentional and there is a ‘reasonable cause’ on the part of Banks.
The ITAT observed that the penalty is not exigible under Section 271(1)(c) of the Act merely because the claim of the assessee has been rejected by the revenue authorities.
“Since the facts are identical, following the order passed by the coordinate bench, we hold that there is a reasonable cause on the part of the assessee in not deducting TDS on the LTC payments made towards foreign travel. Accordingly we hold that penalty u/s 271C is not sustainable. Accordingly we set aside the order passed by the ldCIT(A) and direct the AO to delete the penalty levied u/s 271C of the Act for the year under consideration,” the Tribunal said.
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