TDS on Foreign Travel LTC Not Deducted: ITAT Confirms ₹17.2 Lakhs Penalty on SBI [Read Order]

The Income Tax Appellate Tribunal (ITAT) Chandigarh Bench has upheld a penalty of ₹17,23,630 for failing to deduct Tax Deducted at Source (TDS) on Leave Travel Concession (LTC) reimbursements involving foreign travel. The Tribunal reiterated that the exemption in this regard is strictly confined to travel within India for LTC is strictly confined to travel within India.

In the course of verification proceedings under TDS verification for Assessment Year 2016-17 it was found by the Assessing Officer (AO) that SBI, Chandigarh branch had made reimbursement of LTC/LFC expenses to employees who had gone abroad.

The AO did not deduct TDS on such a payment under Section 192 of the Income Tax Act. The State bank of India Local Head , Chandigarh is treated as assessee in default under Section 201 of the Income Tax Act as the entire amount of reimbursement was treated as tax payable by the bank since Section 10(5) does not include foreign destinations.

A penalty equal to the tax amount was imposed under Section 271C. Further, the bank contended that there was a reasonable cause for not deducting TDS therefore the bank contended that there was a technical penalty and that there was guilty intent on their part.

The Revenue stated that the law is absolute and only permits exemption for travels to any place in India under Section 10(5).

The Bench comprising Laliet Kumar (Judicial Member) and Krinwant Sahay (Accountant Member) observed that "The Hon'ble Supreme Court has conclusively held that exemption under section 10(5) of the Act is available only in respect of travel within India and not for foreign travel."

ITAT observed that the bank had failed to establish reasonable cause for waiver of penalty under Section 273B. Thus, there was no infirmity in the order of the CIT(A), and the appeal was dismissed.

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