The Tax Publishers2021 TaxPub(DT) 0599 (Mum-Trib)


Section 10(5) Section 201 read with Section 192

Where the employer was under bona fide belief that LTC claim of employees cannot be denied because the journey also includes visit outside India, the assessee-employer cannot be faulted for not deducting tax at source under section 192 while making reimbursement of LTC to employees, therefore, CIT(A) was not justified in upholding AO's order treating assessee as assessee-in-default.

Tax deduction at source - Assessee-in-default - For non-deduction of TDS under section 201 read with section 192 - On Leave Travel Concession where part journey leg is outside India

Assessee was held to be in default for non-deduction of TDS under section 192 on its employee's claim of Leave Travel Concession. The AO and Commissioner (Appeals) held that while in the availing of LTC benefit if part of the interim journey was outside India, the entire LTC is not claimable under section 10(5) read with rule 2B. Since the assessee did not take this stand and did not effect TDS they were held in default under section 201. For instance, a journey from Mumbai - Kolkata - Singapore - Kolkata - Mumbai return was read as a disallowable LTC journey as part of the journey was circuitous and outside India. The issue was read thus by revenue no matter even if the fare what was reimbursed to the employees under rule 2B and their employment orders was the lowest airfare by the shortest distance viz. Mumbai - Kolkata and Kolkata - Mumbai return for instance. Held: As long as they had followed rule 2B to reimburse the shortest airfare journey they were in bona fide belief and cannot be held to be in default for non-deduction of TDS under section 192 on LTC. The provision under rule 2B nowhere makes a reference that the entire journey has to be only within India either.


Applied:CIT v. Gwalior Rayon & Silk Mills Ltd. (1983) 140 ITR 832 (MP) : 1983 TaxPub(DT) 1042 (MP-HC)Distinguished:ITAT Bench Jaipur order on 28-3-2017 which is reported in (2017) 81 192 (Jaipur-Tribunal) : 2017 TaxPub(DT) 1382 (Jp-Trib), State Bank of India, Kanpur v. ACIT in ITA Nos. 138 to 140/Lkw/2015, dated 4-3-2016 of ITAT, Lucknow Bench : 2016 TaxPub(DT) 1330 (Luck-Trib) and Om Prakash Mehta v. ITO in ITA No. 938/Chandigarh/2011, dt. 29-4-2013

REFERRED : The Madras High Court has also granted an interim order instructing bankers not to effect TDS on or after 16-2-2015 on LTC if the employee had visited a foreign country in the interim leg of the LTC


A.Y. : 2012-13



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