Employer is bound to deduct Tax at source for Foreign country travel of employees?
STATE BANK OF INDIA & ORS. vs. ASSISTANT COMMISSIONER OF INCOME TAX & ORS.
ISSUE
Whether employer is bound to deduct Tax at source for Foreign country travel of employees?
HELD
As rightly highlighted by the Hon’ble Tribunal, Lucknow Bench (supra) and careful perusal of the provisions of s.10(5) of the Act, we are of the view that the said provision was introduced in order to motivate the employees and also to encourage tourism in India and, therefore, the reimbursement of LTC/LFC was exempted, but, there was no intention of the Legislature to allow the employees to travel abroad under the garb of benefit of LTC available by virtue of s.10(5) of the Act.
However, in the present case the employees of the assessee-Bank have travelled outside India and raised claims of their expenditure incurred therein. There is no dispute that the assessee-Bank may not be aware with the plan of travel of its employees initially, however, at the time of settlement of LTC/LFC bills, the employees should have placed comprehensive details before the assessee-Bank as to where they have travelled/visited and raised the claims, that means to say, the assessee-Bank was well aware of the fact that its employees have travelled in foreign countries too by availing LTC/LFC for which they were not entitled for exemption u/s. 10(5) of the Act. Such being the scenario, the assessee-Bank cannot now plead that it was under the bona fide belief that the amounts claimed were exempt u/s. 10(5) of the Act.
Thus, the Assessing Officer(TDS) was within her domain to term/charge that the assessee-Bank was under obligation to deduct TDS on such payments. Since the assessee-Bank had failed to do so, the A.O.(TDS) had rightly treated the assessee an ‘assessee in default’ u/s. 201(1) of the Act.
The assessee had relied on various case laws for the proposition that its estimate is bona fide and it cannot be held to be an ‘assessee in default’ u/s. 201(1) of the Act. This contention of the assessee is without legal basis, since the assessee had made no effort to prove how its belief was formed that such foreign travel expenses would come within the ambit of sec. 10(5) of the I.T. Act. Taking into account all the facts and circumstances of the issue as deliberated upon in the fore-going paragraphs and also in conformity with the judicial views (supra), we are of the view that the authorities below were justified in their stand which requires no interference of this Bench. It is ordered accordingly.”
CONCLUSION
Foreign country travels of employees are not entitled for exemption for reimbursement of LTC under section 10(5) of the Act, hence, the employer is bound to deduct Tax at Source treating the amount as part of the employee’s total salary.
IN FAVOUR OF
Revenue
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