STATE BANK OF INDIA versus ASSISTANT COMMISSIONER OF INCOME TAX

Citation: [2022] 10 S.C.R. 51 · Decided: 04-11-2022 · Supreme Court of India · Bench: UDAY UMESH LALIT · Disposal: Dismissed

Judgment (excerpt)

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STATE BANK OF INDIA
v.
ASSISTANT COMMISSIONER OF INCOME TAX
(Civil Appeal No. 8181 of 2022)
NOVEMBER 04, 2022
[UDAY UMESH LALIT, CJI, S. RAVINDRA BHAT AND
SUDHANSHU DHULIA, JJ.]
Income Tax Act, 1961: ss. 10(5), 192(1), 201 – Deduction of
tax at source from salary of employee – Consequences of failure to
deduct or pay – Employees of assessee bank availed Leave Travel
Concession (LTC) taking a circuitous route, they travelled not just
within india but their journey involved a foreign leg also, and was
also not the shortest route – Assessee bank while releasing payments
to its employees as LTC, did not deduct the tax at source of its
employees – Tribunal as also the High Court held the assessee bank
in default for not deducting TDS of its employees – On appeal,
held: Employees travelled to foreign and got full reimbursement
u/s 10 – LTC is for travel within India – Moment employees undertake
travel with a foreign leg, it is not a travel within India, thus, not
covered under the provisions of s. 10(5) – A foreign travel also
frustrates the basic purpose of LTC, which is to familiarise a civil
servant or a Government employee to gain some perspective of
Indian culture and it was for this reason that reimbursement of LTC
was exempted – There was no intention of legislature to allow the
employees to travel abroad in the garb of LTC available by virtue
of s. 10(5) – Furthermore, the assessee-employer cannot claim
ignorance about the travel plans of its employees as during
settlement of LTC Bills the complete facts are available before the
assessee about the details of their employees’ travels – It cannot be
a case of bonafide mistake – Thus, the order passed by the High
Court does not call for interference – Income Tax Rules – r. 2B.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 8181
of 2022.
From the Judgment and Order dated 13.01.2020 of the High Court
of Delhi at New Delhi in I.T.A. No. 5 of 2020.
[2022] 10 S.C.R. 51
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SUPREME COURT REPORTS
[2022] 10 S.C.R.
K. V. Vishwanathan, Sr. Adv., Sanjay Kapur, Ms. Megha Karnwal,
Arjun Bhatia, Aashish Kumar, Lalit Rajput, Advs. for the Appellant.
Zoheb Hussain, Digvijay Dam, Bhuvan Mishra, Ms. Swarupama
Chaturvedi, Raj Bahadur Yadav, Advs. for the Respondent.
The Order of the Court was passed by
SUDHANSHU DHULIA, J.
1. Leave granted. The appellant (State Bank of India) has
challenged the judgement dated 13.01.2020 passed by a Division Bench
of the Delhi High Court in ITA No. 05/2020 which has dismissed the
appeal filed by the appellant and upheld the order passed by the Income
Tax Appellate Tribunal (ITAT) dated 09.07.2019, holding the appellant
as an assessee in default for the Assessment Year (AY) 2013-14, for
not deducting TDS of its employees.
2. The question which has fallen for our consideration is whether
the appellant was in default for not deducting tax at source while releasing
payments to its employees as Leave Travel Concession (LTC).
3. LTC is a payment made to an employee which is exempted as
‘income’ and hence under normal circumstances, there should be no
question of TDS on this payment. All the same, LTC has to be availed
by an employee within certain limitations, prescribed by the law. Firstly,
the travel must be done from one designated place in India to another
designated place within India. In other words, LTC is not for a foreign
travel. Secondly, LTC is given for the shortest route between these two
places. Admittedly, the employees of SBI in the present case, had done
their travel not just within India but their journey involved a foreign leg
as well. It was also not the shortest route, consequently, according to the
Revenue this was not a travel from a designated place within India to
another designated place in India and thus it was in violation of the
statutory provisions and hence the payment made to its employees by
the Bank could not be exempted, and the Bank ought to have deducted
Tax at source, while making this payment. To give an example of one of
the employees of the appellant who availed LTC taking a circuitous
route of Delhi- Madurai- Columbo- Kuala Lampur- Singapore- Columbo-
Delhi and his claim was fully reimbursed by the appellant and no tax
was deducted under Section 192(1) for the same.
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4. The appellant on the other hand through its counsel senior
advocate Shri K.V. Vishwanathan, would argue that though the travel
made by its employees under LTC did involve a foreign leg and admitted

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