ITAT rules SBI not in default for TDS on LFC payments as it acted per instructions; travel outside India breaks taxability chain.
ITAT: State Bank of India Not Liable for TDS Default on LFC Payments
The Income Tax Appellate Tribunal (ITAT) has ruled in favor of the State Bank of India (SBI), holding that it cannot be treated as in default for non-deduction of TDS on Leave Travel Concession (LFC) reimbursements where travel occurred outside India. The Assessing Officer had recorded that certain employees availed LFC with foreign travel, negating domestic taxability.
The AO had imposed liability on SBI under Section 201 for failure to deduct tax at source. However, the ITAT observed that reimbursement for foreign travel under LFC schemes does not constitute taxable perquisite under Section 10(5), and thus, no TDS obligation arises. SBI acted on employee claims and HR approvals, discharging its duty as a payer in good faith.
Where no chargeability arises in law, there can be no failure to deduct tax; the obligation under Section 192 is conditional on existence of taxable salary income.
This decision protects employers who process reimbursements based on declared facts and official approvals. Practitioners should argue against automatic TDS liability in cases involving non-taxable allowances, especially where statutory conditions for exemption are satisfied.
Citations
- Section 10(5), Section 192, Section 201, Income Tax Act, 1961
