The Tax Publishers2020 TaxPub(DT) 1420 (Bang-Trib)

INCOME TAX ACT, 1961

Section 271C

As there was a reasonable cause on the part of assessee in not deducting TDS on LTC payments made towards foreign travel and its action was not wanton but on a bona fide belief, the penalty levied under section 271C would not be sustainable.

Penalty under section 271C - Leviability - Failure to deduct tax at source - Reasonable cause

AO noticed that assessee-bank provided LTC facility to its employees and some of the employees undertook foreign travel by availing LTC facility. Further, it was noticed that the assessee extended exemption under section 10(5) in respect of travel undertaken by the employees to foreign destination also. Since the travel undertaken outside India was not eligible for exemption under section 10(5), the AO held that assessee should have deducted tax at source on the LTC amount. Subsequently penalty under section 271C was levied. Held: Although assessee failed to deduct tax at source in respect of foreign travel undertaken by its employees by availing LTC facility but in proceedings under section 201, the assessee accepted the claim and paid the demand along with interest. Further, the assessee also explained that there was error of judgment on its part in understanding and applying provisions of section 10(5). Thus, it would be said that the assessee did not deduct tax at source due reasonable cause and its action was not wanton but on a bona fide belief. Hence, the penalty levied under section 271C would not be sustainable.

Followed:State Bank of India v. ACIT (2019) 101 taxmann.com 61 (Jaipur-Trib.) : 2019 TaxPub(DT) 0151 (Jp-Trib)

REFERRED :

FAVOUR : In assessee's favour

A.Y. :



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