· A survey action was conducted in the business premises of the assessee to verify the TDS compliance by the assessee in the case of salary and perquisite payments made to its employees.
· It was alleged by the AO that the assessee bank had erroneously allowed LTC exemption too its employees, since the travels also included travel outside India. Therefore, considering the provisions of section 10(5) of the Act read with Rule 2B of Income Tax Rules, the AO held the assessee bank as an assessee-in-default u/s 201(1) of the Act, for making short deduction of TDS u/s 192 of the Act.
· The CIT(A) also confirmed the AO’s stand giving almost identical reasons.
· The Tribunal, after considering the facts of the case, stated that as per the provisions of section 10(5) of the Act, only the reimbursement of expenses which were incurred on travel of employees and his family to any place in India, subject to certain conditions, are exempt. The Tribunal took note of the fact that since the employees of the assessee bank had travelled to foreign countries, the benefit of exemption available under section 10(5) of the Act should not have been granted.
· The Tribunal further took note of the fact that assessee bank may not have been aware of the details of the employees' places or destination of visits at the time of advancement of LTC amounts, however, at the final settlement of the claims of the employees, the assessee bank should have obtained all the relevant details such as the places of visits etc.
· Thus, the Tribunal concluded that when the assessee bank was aware of the fact that its employees had visited foreign countries by availing LTC concession, and so he was not entitled for exemption of reimbursement of LTC under section 10(5) of the Act, the assessee bank was under obligation to deduct tax at source treating such an amount as not exempt.Since the assessee bank had failed to enforce its duty to deduct tax at source as envisaged in section 192, the assessee bank was an assessee in default under section 201(1) of the Act.
For further reading, refer the attachment.
Further Reading